The Agricultural Bank of China (ABC), one of the largest banks in the world and the third in China in terms of asset size, has issued a $300,000 land-backed credit in China’s Guizhou province, reported Financialnews.com. The loan is the first blockchain-enabled loan issued by ABC.
According to the bank, blockchain technology is a tamper-proof system that improves upon the manual process of approving credit applications as well as tackling the challenge of double spending, or the problem of borrowers using the same piece of property as collateral to secure several loans from different lending institutions.
It added that distributed ledger technology is an efficient way of updating all stakeholders with data on the borrowers and the collateral they use.
ABC said that it wants to provide farmers and businesses broader access to financial facilities, especially those who own agricultural land in rural parts of China. The bank believes that utilizing blockchain is one of the best ways to expand its financial services to the underserved sector.
The bank is reported to be planning to expand the blockchain application process to accept other types of assets as collateral to apply for loans. Early this year, ABC announced the development of a decentralized network for its unsecured loans window aimed at providing credits in smaller amounts to agricultural e-commerce merchants through an automated process.
ABC is not the only bank utilizing blockchain technology in its lending. Last month, Spain's largest bank, BBVA (MC:BBVA), signed a €100-million-Euro long-term bilateral corporate loan with the construction and civil engineering company ACS using blockchain technology.
The loan was not the first credit BBVA extended using blockchain. Only recently, the bank said it signed a loan deal with the Spanish consulting and technology company Indra. In June, BBVA signed an agreement with the Spanish energy company Repsol (MC:REP) for the development of blockchain-based financial solutions.
BBVA believes the technology guarantees the transparency and traceability of the contract.
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