Deploying blockchain in durian trade is bearing fruit

Singapore

BLOCKCHAIN is commonly associated with digital coins, but its deployment in the track-and-trace process of the supply chain may yield benefits beyond raising efficiency.

With the greatly increased visibility of goods and money flow that blockchain allows, more private investors are stepping up to provide alternative sources of trade financing to companies in the supply chain.

Fund management firm Havenport Investments has partnered blockchain technology company DiMuto to deploy the technology in the durian trade. Havenport manages about S$200 million in assets, some of which is invested in third party products and private credit opportunities. These opportunities include the channelling of private capital into the trade financing area, where smaller companies typically find it challenging to access bank facilities.

Traditionally, the fresh fruit industry is one where financial risks are seen to be onerous, and banks and financial institutions have been reluctant to extend credit lines to smaller businesses in the supply chain.

The partnership with DiMuto empowers Havenport to holistically manage and mitigate risks as its track-and-trace technology provides end-to-end visibility of goods and money flow across the supply chain.

In this case, trade financing is provided to Thailand's largest durian exporter, Queen Frozen Fruit. DiMuto's technology digitises every durian, enabling real-time monitoring of assets and clear documentation of every single trade transaction.

The technology mitigates the risks of goods and invoice tampering, among others. It allows Havenport to effectively manage and price risks and open up new financing opportunities for small and medium-sized companies, as well as create opportunities for private investors. The entire process of shipping durian from farm to shops can be monitored in real time via mobile devices.

Investors providing private credit benefit with the chance to earn an interest rate higher than bank deposits, in addition to holding an asset uncorrelated with stocks and bonds and with a relatively short duration.

The global trade finance gap was estimated at US$1.5 trillion in 2017, with the biggest gaps among SMEs which account for about 75 per cent of trade finance transactions.

Said Patrick Tan, Havenport managing partner: "With immutable blockchain technology, we are better able to quantify and isolate the risks of this trade and be in a stronger position to attribute liability. This will enable us to confidently provide trade financing to a wider range of quality and profitable businesses...

"Providing such financing is also beneficial to Havenport's accredited and corporate investors who can potentially achieve a steady and regular coupon payout, in a trade that is largely insulated from and uncorrelated to the volatility of the broader equity and bond markets."

Havenport plans to expand its trade financing portfolio to cover more suppliers, industries and product types by leveraging DiMuto's blockchain technology wherever possible.

DiMuto founder and chairman Gary Loh said: "Our partnership with Havenport shows the power of DiMuto technology, which can tag, track and trace every food or fruit item, as they make their way through the entire supply chain.

"This not only guarantees data accuracy and reliability but also encourages quality assurance, empowering fund managers like Havenport to price the different associated risks and provide financing to global trades."

Mr Loh is also non-executive director and vice chairman of SunMoon Food Company.