International Trade Finance Research Articles

Revolutionizing trade finance: leveraging the power of blockchain and AI in electronic letters of credit

Abstract This article examines the innovative combination of blockchain and artificial intelligence (AI) technologies in the field of electronic letters of credit and international trade finance. It explores how the combined effect of this convergence may greatly improve the security, effectiveness, and clarity of trade finance procedures. The article presents a suggested framework for combining various technologies, focusing on important design considerations including security, trust, interoperability, and adherence to international trade norms. The technological design blends blockchain’s decentralized ledger with AI’s analytical capabilities, highlighting the need of smart contracts, data management, and application programming interfaces for smooth interoperability. The implementation plan and stages are meticulously detailed, emphasizing the systematic approach necessary for effective integration. The article also discusses the problems and dangers related to this technology integration, such as technical obstacles, regulatory compliance, security threats, stakeholder acceptance, and cost factors. The conclusion outlines the impact of blockchain and AI on trade finance, discusses their larger implications for international commerce, and advocates for the adoption of these advanced technologies by collective action. This article seeks to provide significant insights to financial institutions, policy-makers, technologists, and stakeholders in the trade finance sector, promoting the modernization of trade finance via new technology.

Article: Digitalizing the End-to-End International Trade Finance Process and the Law: A Mission for the Entire Ecosystem

This article considers the digitalization of the end-to-end trade finance process. Given that the emergence and adoption of innovative technologies in trade finance have made full digitalization possible, this article argues that digitalizing the entire trade finance process is a mission for the entire trade finance ecosystem: to successfully digitalize the full trade finance process, one would need to get all the parties involved on board. It also argues that innovation is only one piece of the puzzle and supporting legal frameworks and recognized standards are essential to accelerate the digitalization journey. Divided into seven parts, the article outlines the development of the trade finance industry, focusing on the main challenges and the legal responses to digitalization, before assessing why digitalization the entire process is hard to scale. It discusses disruptive technologies in trade finance, concluding that collaboration between the trade finance industry parties and removing legal uncertainty can assist in accelerating the digitalization transformation. Digitalizing the end-to-end process, trade finance, disruptive technologies, blockchain, standardisation and harmonisation, MLETR, URDTT

Blockchain Technology in International Trade: A Catalyst for Efficiency and Revenue Generation

Background and Aim: The advent of blockchain technology has brought about a significant transformation in the realms of finance and international trade, primarily through the implementation of a decentralized ledger system for conducting transactions. The present study aims to assess the efficacy and economic advantages of employing blockchain technology in the context of international trade financing. Specifically, it focuses on the potential decrease in transaction time and cost savings that Chinese domestic banks may experience as a result of adopting this technology. Materials and Methods: This research employs a quantitative methodology to assess the efficacy of blockchain technology in the context of international trade, with a specific emphasis on banking professionals. The study utilizes a cost-benefit analysis approach to maximize advantages and minimize drawbacks. Results: The research revealed that the implementation of blockchain technology has the potential to improve operational efficiency and mitigate transaction risks. However, it is important to note that this comes at the expense of increased costs, rendering it unsuitable for widespread adoption due to its unfavorable net benefit. Conclusion: The findings of the study indicate that the use of blockchain technology leads to enhanced operational efficiency and decreased transactional risks. However, it is important to note that this implementation also entails elevated costs, rendering it impractical for widespread adoption due to its unfavorable net benefit. The report posits that the advantages of operational efficiency offered by blockchain technology are overshadowed by the accompanying expenses, thereby advocating for a prudent approach to its implementation in the realm of international trade. The recommendations encompass many strategies such as the implementation of trial projects, conducting thorough cost-benefit analyses, using hybrid techniques, ensuring ongoing monitoring, and maintaining strict adherence to legal regulations.

International trade finance problems and prospects for development

International trade finance problems and prospects for development

Research on Stress Test of Bank Credit Risk in International Trade Based on DEA Model

International trade financing refers to the sum of all kinds of services provided by banks to meet the capital needs of traders around the capital needs and the laws of capital flow, combined with all aspects of international settlement. As an important part of finance, banking has played a great role in promoting economic and social development. Similarly, economic and social development will also promote the progress and development of banking. With the continuous development of the international economic and financial situation, the potential risks of international trade financing are also growing and changing. Studying the application of stress testing in commercial banks can effectively find the shortcomings of stress testing in commercial banks, which has positive theoretical and practical significance for the docking of management concepts and corporate culture and the construction of a comprehensive risk management system. According to the theory of credit portfolio, this paper puts forward a stress test scheme of bank credit risk in international trade based on DEA, so as to strengthen the management and control of credit risk and ensure the long-term healthy and stable development of banks.

Intra-firm and arm’s length export propensity and intensity of MNE foreign subsidiaries

In this study, we build upon internalisation theory in the international business literature and international trade finance in the international economics literature to examine how financial capital affects the decision to export (export propensity) and the share of exports over total sales (export intensity) by the foreign subsidiaries of multinational enterprises. We dissect exports into intra-firm exports (exports to sister affiliates and parent firms) and arm’s length exports (exports to third-party external customers), and we focus on the types of capital that can be used for financing exports, namely intra-firm loans and bank loans. We theorise that these two financing sources have different impacts on subsidiary export behaviour. To test our hypotheses, we use a survey dataset of subsidiaries, host-country data, and two-part models. Our findings show that intra-firm loans are positively related to arm’s length export propensity and intensity; however, intra-firm loans have no significant relationship with intra-firm export propensity and export intensity. Additionally, on the one hand, bank loans have a positive impact on the likelihood of subsidiaries becoming arm’s length exporters, but they do not help subsidiaries with arm’s length export intensity. On the other hand, bank loans negatively impact the likelihood of subsidiaries becoming intra-firm exporters; however, once subsidiaries participate in intra-firm exports, bank loans are positively associated with intra-firm export intensity. We discuss the implications of our findings for theory and practice.

Problems and Countermeasures of International Trade Financing of Small and Medium-Sized Enterprises in China

Small and medium-sized enterprises are the foundation of China’s national economy, and they are important forces to promote economic and social development. They play an irreplaceable role in promoting scientific and technological progress, increasing social employment, expanding foreign trade, and other aspects in which they have become an important part of China’s socialist market economy. Based on the research background of international trade financing, this paper analyzes the problems existing in the international trade financing of small and medium-sized enterprises in China to put forward countermeasures and suggestions, hoping to help these small and medium-sized enterprises solve the financing problem so as to achieve a healthy development in the international trade market environment.

About document presentation in letters of credit in digital form

Information technology has significantly changed the practice of international trade finance in the field of monetary transactions. The article examines the international rules for electronic presentation of documents in a letter-of-credit in the light of adoption of the eUCP v. 2. 0. The main characteristics of electronic records submitted under a letter of credit are formulated, and the method of their authentication is determined. The practice of transferring of electronic documents for payment is analyzed, and the specific features of their examination are considered. The importance of transition to electronic document management, which will speed up trading operations and reduce their cost, was noted. It is concluded that at the present stage of development, the transition to full electronic document management is difficult due to the involvement of a large number of participants who are reluctant to use electronic records to formalize their relationships in trade operations, in addition to banks.

Trade finance in digital era: Can FinTech harness the current risks and challenges?

Trade and commercial activities are the foundation and supporting pillars of the global economy. It is through trade, particularly international trade, that a country’s economy is developed and sustained. It is a fact that FinTech platforms help financial service providers to become more time and cost-efficient in delivering trade finance services, however, the moves come with a high price. As the system becomes complex, the risks associated with it are also high due to systemic vulnerabilities, hackers and security hurdles. This current state requires more rigorous risk identification and management systems along with proficient internal control system, especially for international trade and trade financing. It has propelled many financial intermediaries to be more competitive in committing to the development of digitised channels and propositions, preparing to cede market share to a new generation of providers that have already seized the imperative to respond to market evolution in international trade. The main aim of this paper is to explore how far can FinTech platforms help the financial service providers to be more efficient in providing their services to the end-user while at the same time be excellent to harness the possibilities of cyber and FinTech risk in this digital era. The study reviews past studies done in this area, especially on the risks and challenges, the prospects and opportunities of FinTechs in trade financing and its ability to cope with the risks inherent in FinTech solutions. The findings show that the benefits of FinTech platforms outweigh the shortcomings and with sustained collaboration, standardization and a holistic approach to the development of FinTech solutions, the risks of digital transformations can be considerably reduced.

Blockchain Won’t Kill the Banks: Why Disintermediation Doesn’t Work in International Trade Finance

In the financial services industry, many people assume blockchain to have significant impacts. From research and practice, we observe two main paradigms of how organizations interact with blockchain. First, organizations use blockchain to optimize existing processes (blockchain-based business process optimization (BPO)). Second, organizations use blockchain to disrupt existing processes, foster disintermediation, and enable disruptive business models (blockchain-based business process disruption (BPD)). However, we lack scientific research that evaluates its de facto potential. We bridge this gap by following a design science research approach to design blockchain-based business process re-engineering (BPRE) for a letter of credit that combines the advantages of BPO and BPD. We conduct three design cycles and develop three artefacts: a BPO, a BPD, and a BPRE approach. Our BPRE approach combines the advantages of partial disintermediation (i.e., increased efficiency and transparency) with the advantages of intermediaries (i.e., process flexibility, liquidity provision, and dispute mediation).

Evaluation of International Trade Finance using WPM Method

International Trade Finance For a variety of stakeholders, including importers, exporters, and trading companies, the International Trade Fund (ITF) offers a complete method of organizing complex trade transactions. From most secure to least safe, there are five main ways to pay in international trade: payment in advance, letter of credit, documented collection or draught, open account, and consignment. Trade financing enables businesses to lower the risks involved in importing or exporting products and services, promoting predictable and secure global trade. Technology disparities, variations in resource availability, variations in demand, the presence of economies of scale, and the existence of government regulations are the five fundamental drivers of international commerce. Typically, only one trade motivation is included in any trading model. The study of monetary interactions between two or more countries is known as international finance. Foreign direct investment and currency exchange rates are two topics that international finance primarily examines. The significance of international finance has grown as a result of increased globalization. The purpose of trade finance is to remove supply risk and payment risk from deals by involving third parties. Trade financing gives the exporter receivables or contractual payments, and credit can be given to the importer to fulfill their trade order. International commercial transactions and import and export activities are made easier by trade finance. Both businesses big and small can use it. to have access to many different financial products. To obtain working cash, small and medium-sized businesses use trade finance instruments. The macro-economic ties and financial exchanges between two countries are the subject of international finance, a subfield of financial economics. This area of finance includes ideas like interest rates, exchange rates, FDI, FPI, and currency in commerce. This paper is the weighted product for solving the routing decision problem Model (WPM) used. Every dynamically assign weight to criteria this proposed scheme considers the relevant valuation method for the European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), Inter-American Development Bank (IDB), Asian Development Bank (ADB), and Number of transactions, Trade credit lines, Issuing banks, Confirming banks. European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), Inter-American Development Bank (IDB), and Asian Development Bank (ADB). A number of transactions, Trade credit lines, Issuing banks, and confirming banks. Inter-American Development Bank (IDB) is got the first rank whereas Asian Development Bank (ADB) has the lowest rank.

Financing in International Trade; a Reference of Legal Measures

Letters of credit and bank guarantee are important instruments of international trade financing. These instruments are the documentary credits. Letter of credit and bank guarantee have two fundamental principles; one is the doctrine of strict compliance and another is the autonomy of the credit. A first principle follows enforceability of terms and conditions of letters of credit and demand guarantee strictly and second principle respects the letter of credit and demand guarantee as a separate contract. Although same contractual principles are applicable for demand guarantee, it is paid to beneficiary by the bank if the buyer of the guarantee makes default. These are much essential instruments of contemporary transnational trading system. Despite it, cash in advance, documentary collection, bank transfer, barter or counter-trade systems are used in the payment of international trade finance.

Factoring as an Alternative Mode of International Trade Finance

This work reviews international factoring, its current worldwide status, and its current situation in Bangladesh. While open account trade in the world is increasing, Bangladesh is still mostly dependent on letter of credits for international trade. This reduces the competitiveness of the Bangladeshi businesses against their international competitors. This work tries to identify the theoretical aspects of factoring, from definition to its risks It also tries to have an assessment of the factoring market in the world an in Bangladesh. The major purpose of this work is to establish the importance of introducing international factoring in Bangladesh.

Market Capitalization and Stocks Traded International Trade Finance SPSS Statistics

Market Capitalization and Stocks Traded International Trade Finance SPSS Statistics

The Power of Digitization in International Trade Finance

The Power of Digitization in International Trade Finance

Legal Questions Raised by Digitalisation: To What Extent Are They Answered By ICC and CMI Instruments?

This paper was drafted to direct the Roundtable discussion on International Chamber of Commerce and Comite Maritime International instruments which took place on Monday 29th April 2019. The aim of the discussion was to map out the extent to which these instruments, taken together, address the legal uncertainties created by digitalisation (the substitution of paper documents by digital alternatives within international trade, transportation and trade finance processes), with a view to identifying further work that may be necessary in this field.

Financial Development and International Trade inside Asia

This study attempts to document the impact of on trade between selected Asian economies and rest of the Asian region. Financial development is used to represent financial development level which includes four dimensions from two perspectives; institutional and market. An financial development index is calculated by combining institutional and market level financial development indices. Effect of market and institutional dimension is measured separately on trade of Asian economies with rest of the Asia. Different macro-variables are controlled including GDP per capita, total population, Inward FDI flow, Outward FDI flow and real effective exchange rates for modeling. Sample includes data for twenty years ranging from 1997-2016 for 16 large economies of Asia. Panel data modeling technique effects regression is used with two different proxies of dependent variable. Overall financial is found to have positive and significant relationship with trade. Study confirms the robustness of the results to different measures of trade. Results from fixed effects model confirm positive and significant relationship between all components of financial development and trade, and between overall financial development and trade in Asian economies. Singapore, Japan and South Korea represent highest levels of financial development while other countries showed relatively less development financial development level according to measure used in this study. An important policy implication is if a country wants to grow economically by using instrument of trade policy especially exports improvement, then it has to develop its financial system to efficiently fulfill international trade finance needs. Keywords: Financial Development Index, International Trade, Asia DOI : 10.7176/EJBM/11-11-04 Publication date : April 30 th 2019

International Trade Finance from the Origins to the Present: Market Structures, Regulation and Governance

We describe how the structure and governance of international trade finance – the oldest domain of international finance – evolved from the Middle Ages until today. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing of international trade then became increasingly centralized and credit instruments were standardized through the diffusion of the local standards of consecutive leading trading centers (Antwerp, Amsterdam, London). This process of market centralization/product standardization culminated in the nineteenth century when London became the global center for international trade finance and the sterling bill of exchange emerged as the most widely used trade finance instrument. The structure of the trade finance market then evolved considerably following the First World War and disintegrated during the interwar de-globalization and Bretton Woods period. The reconstruction of global trade finance in the post-1970 period gave way to the decentralized market structure that prevails nowadays.

Research on International Trade Financing of Small and Medium-sized Enterprisesunder Supply-side Reform

Research on International Trade Financing of Small and Medium-sized Enterprisesunder Supply-side Reform

ANALYSIS OF FACTORS AFFECTING INTERNATIONAL BANKING ACTIVITIES: A FOCUS ON THE TRANSACTIONS OF ISLAMIC INTERNATIONAL TRADE FINANCING Case Study in XYZ Islamic Bank

This research aims to analyze the factors affecting international banking activities,especially the transactions of Islamic International Trade Financing (case studyin XYZ Islamic Bank). Multinomial Logistic regression analysis was used in thisstudy. The independent variable consisted of capability of human resources, customers’ needs of Islamic International Trade Financing (IITF) facilities and product divercification of Islamic International Trade Finance. Meanwhile, the dependent variable was the Islamic International Trade Financing activities at XYZ Islamic Bank. This study used both primary and secondary data where primary data collected from questionnaire survey of 70 respondents and secondary data from various literatures. The result showed that the factor that significantly affected the Islamic International Trade Financing was the custumers’ needs of Islamic International Trade Financing. The other two factors did not significantly affect the Islamic International Trade Financing at XYZ Islamic Bank. The influence of customers in increasing Islamic International Trade Financing at XYZ Islamic Bank was the active customers which had opportunity 6.024 times higher than the passive customers in affecting Islamic International Trade Financing at XYZ Islamic bank. Recommendation from this study is encouraging the consumer to enhance international trade finance transaction to be more recognize the characteristics of XYZ Islamic Bank consumer. This way would be change passive consumer become active consumer.