Blockchain in Supply Chain Finance (SCF) By Azgari Lipshy

About the Author:

Azgari Lipshy Azgari Lipshy is a yogi by sunrise, a SAAS account manager by day, and a live music fanatic by night. She writes about her experiences while traveling, cooking, yoga, and technology that she finds fascinating.

What is Blockchain?

When people think about blockchain, the first thing that immediately comes to mind is digital currencies. Blockchain, on the other hand, is significantly more valuable and has the potential to revolutionize numerous sectors. It is a distributed digital ledger shared by all participating systems (nodes). Every transaction in the network is recorded in the ledger, which greatly increases transparency. For the key stakeholders, the nexus of supply chain finance with blockchain technology presents considerable benefits.

Contemporary Supply Chain Finance System and Its Challenges

In the present context, where the Covid-19 pandemic has shown the flaws in the supply chain financing and trade systems that are currently in use, digital transformation with blockchain promises to reduce the friction in global commerce. Blockchain technology enables supply chain finance solutions to improve by lowering inefficiencies and enhancing visibility between stakeholders; these issues have been the key obstacles in supply chain finance.

Companies were already evaluating the potential of blockchain to update some components of their supply chains before the COVID-19 outbreak. Traditional supply chains are typically characterized by cumbersome paperwork, contradicting records, and delays brought on by manual reconciliation processes requiring actions and document exchanges among several parties, which may also be inefficient, data-intensive, and expensive.

Supply Chain Finance (SCF) is a crucial but largely underappreciated application of blockchain technology. The European Commission calculated that the financing of trade transactions was worth USD 10 trillion in 2017 alone. Trade and SCF are required for up to 80% of global trade transactions to provide liquidity and reduce risk. SCF encompasses several approaches and practices for optimizing the working capital involved in supply chain transactions. However, the trade and supply chain financing industry’s inherent dependence on paper-based data has increased costs and led to inefficiencies.

COVID-19 exposed the shortcomings of the old supply chain system. Blockchain now appears to be increasingly used to upgrade the supply chain as companies experience the benefits of smart production and distribution first-hand.

Using blockchain in this setting could accrue massive benefits, such as secure and auditable transactions, validation, customs compliance, and automated documentation to support legal matters. Blockchain in the supply chain enhances quality control, increases end-to-end transparency, reduces costs, and increases productivity.

Since 2018–19, when news broke that Walmart was using a blockchain network to track mangoes and other items as they moved through the supply chain, businesses and governments have also been looking at investing in blockchain solutions with a focus on the supply chain.

Benefits of Blockchain in Supply Chain Finance

Authenticity in The Supply Chain

The supply chain financing industry is a vast network with many different stakeholders. There are numerous interested parties, from buyers to suppliers to middlemen, and the information flow is not always clear. Each stakeholder may put their interests ahead of those of other stakeholders, resulting in delays in the supply chain.

This issue can be resolved using blockchain. The stakeholders who have access to the same data are given copies of the same digital ledger, which maintains the records in the network. Blockchain’s immutability eliminates misunderstandings and guarantees the network’s validity and transparency.

Inclusivity in The Supply Chain Ecosystem

There are flaws in the current supply chain finance environment, particularly regarding financial inclusion. The top 10 to 50 suppliers often receive funding from supply chain financiers, cutting out many small and medium-sized businesses. A smaller group of suppliers might gain more from immediate payment with buyer-led supply chain finance than their counterparts; therefore, this is unfair.

Blockchain technology might solve this problem, which would also open up supply chain finance to all parties. Due to the characteristics of the blockchain network, supply chain finance providers may be able to finance invoices issued by all suppliers. Finance providers have no justification for restricting funding to only the most successful suppliers because every transaction and exchange of information is recorded in the ledger.

Redefines Supply Chain Financiers

In buyer-led supply chain financing, financial firms are often the financiers. They are in charge of paying the suppliers’ invoices. Buyers repay them via a repayment schedule that includes the borrowed amount plus a little charge and interest.

While financial institutions will always be important in buyer-led supply chain finance, blockchain may make the system more accessible to ecosystem participants. Individual investors and corporate foundations alike might benefit financially from supply chain finance. Platforms are already using blockchain to enable various lenders to use supply chain financing to generate profits.

Enhances Supply Chain Sub-Operations

Information sharing is a problem if there are several parties involved. A similar problem has plagued supply chain financing. In reality, information inaccuracy is one of the main reasons supply chain finance has struggled to address the enduring problems in the supply chain.

The solution, though, could lie in supply chain financing using blockchain technology. The supply chain may be made more efficient by keeping track of information sharing, asset transfers, product quality, and timetables using the digital, immutable ledger. Thus. All stakeholders can save time and money.


Technology like blockchain appears to have earned a place in the next digital revolution as society progresses toward the center of the 4th industrial revolution, which is defined by more use of automation, IoT, big data, smart solutions, and data exchange.

Although blockchain technology is still relatively new, it has already proven useful in various contexts. The great value of blockchain has already benefitted the industries of entertainment, finance, and payments, and it will continue to do so in the years to come. It is thus just a matter of time before blockchain technology merges with supply chain finance and significantly enhances it.

About the Author

Azgari Lipshy Azgari Lipshy is a yogi by sunrise, a SAAS account manager by day, and a live music fanatic by night. She writes about her experiences while traveling, cooking, yoga, and technology that she finds fascinating.

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