China’s First Blockchain-based Unsecured Loan

China’s First Blockchain-based Unsecured Loan

NYSE stock exchange listed OneConnect (OCFT) have launched a blockchain-based financing platform for small and medium-sized enterprises (SMEs) in Shenzhen, China. Using data from 26 Government departments and 129 financial institutions – including China Construction Bank and ICBC -, the platform compiles corporate profiles and related risk evaluations for more than 11 million companies.

The inaugural online unsecured loans were issued during a launch ceremony on 2 January. Using an “Intelligent Matching” feature for lenders and borrowers, the platform granted the first financial credit agreements within 10 minutes of opening. The initial beneficiaries were stated to be:

  • Huizhou Shenghua Industry Co., Ltd received 1.12 million yuan (approximately $161,000) in supply chain financing from ICBC
  • Guangdong Sunlux IOT Technology Co., Ltd received 500,000 yuan (approximately $71,750) in foreign trade financing from Ping An Bank
  • Corehelm Electronic Technology Co., Ltd received 200,000 yuan (approximately $28,700) in intellectual property financing from China Construction Bank.

Ping An Connection

As an associate company of financial giant Ping An, OneConnect is viewed as one of China’s leading technology as a service (TaaS) providers and last year published a whitepaper titled “Establishing An Open and Shared Financial System with Blockchain.”

Situated in Guangdong, the closest mainland province to Hong Kong, Shenzhen’s substantial financial and legal reforms have been widely expected in China to benefit the whole Guandong-Hong Kong-Macao Greater Bay Area. With social and political unrest ongoing in Hong Kong, other legal observers have suggested Shenzhen may gain more prominence as a financial centre in the region.

China recently imposed tighter liquidity risk management requirements on smaller lenders which in turn closed a traditional flow of capital into the nation’s shadow banking system that functions outside of the formal sector and has long been a route of funding for SMEs.

OneConnect believe the new “…platform with blockchain as its key underlying technology marks the deep integration of digital government and fintech, signalling that difficulties in obtaining financing, including the associated high cost and slow pace of completing the process, faced by SMEs can be solved by following the ‘Guangdong model.'”