As a global problem, financing difficulties in small and medium-sized enterprises (SMEs) has been raising wide attentions among industry, academia, government and enterprise for a long time.
Small and medium-sized enterprises (SMEs) are the important component of our country’s economy as it portrays essential role in macroeconomic development. On 25th of April 2021, China Banking and Insurance Regulatory Commission issued “Notice Regarding Further Promote High-Quality Development of Financial Services in Micro and Small Enterprises (MSEs) in 2021” which emphasized on the positive role played by financial technology when SMEs started financial services.
As technologies such as blockchain, Big Data and AI show deeper influences on financial services, especially profound development of blockchain, technology empowering industrial application has gradually become the latest trend. Particularly for financial industry, blockchain’s innate characteristics in decentralization has demonstrated strong innovation power and disruptive ability in this industry, hence it has become the best underlying technology in practising inclusive financing, an important infrastructure in supporting real economic development and new ideas provider in solving financing difficulties in SMEs.
Currently, especially when global economy prospect is still uncertain and input inflation pressure continuously enlarges, financing difficulties and high financing cost become more prominent as SMEs are located at the lower position of industrial chain. Furthermore, due to capital chain rupture, many enterprises miss the good opportunity of industrial development and suffer from imminent danger.
As the representative of technological innovation, Vonechain Technology develops VoneCredit, blockchain cloud credit supply chain finance platform which uses new technology to identify pros and cons of enterprises in supply chain and provide accurate credit support. Via technology, VoneCredit achieves data and asset empowerment, shows unique advantage in solving pain points of SMEs such as financing difficulties and fulfils value concept of enterprise by serving economic social development positively. Moreover, Vonechain’s product, VoneCredit was also awarded “Excellent Case Award of China Blockchain Industry Year 2020-2021” during the China Industrial Chain and Supply Chain Finance Summit held in early June.
SMEs’ Financing Dilemma
Currently, according to an investigation from reporter of China Economic Weekly, due to continuous increasing of cost and destructive competition in industry, the double dilemma mentioned above will speed up closing down of small and medium-sized companies.
Based on a report that recently announced by The National Federation of Independent Business (NFIB), many small enterprises are facing bigger living pressures and thousands of small enterprises may still be hard to get “salvation” despite economy of United States of America has gradually reopened. Furthermore, according to the latest investigation report data of Alignable, a small business network in USA, 35% of business owners still faces the risk of permanent closure before this year’s summer ends.
There are various types of dilemma encountered by SMEs, but one of the reasons that should not be ignored is financing difficulties.
As SMEs are located at the lower position of industrial chain supply chain, the enterprises are often controlled by reasons such as insufficient personal credit, lack of pledged object, asymmetrical information, trust endorsement and difficulties in keeping its agreement which cause financing to become hard, expensive and slow. Therefore, these also become a normal obstacle restraint faced by the enterprises when industry rapidly develops.
Meanwhile, under external development environment, bank that prepares capital only willing to provide financing services for core enterprises on chain or expand to tier 1 enterprise in upstream and downstream of core enterprise due to risk control consideration. Hence, bank fails to satisfy the requirement of vast SMEs that requires large financing needs and causes some SMEs which have good development prospects to either reconcile with current situation, solve difficulties via harmful way or expand production by borrowing money from loan shark. Eventually, danger is hidden under healthy development of enterprise.
Since blockchain emerges, its decentralized, traceability and tamper-proof characteristics open up a new direction for financing difficulties breakthrough. Via empowerment of blockchain in industrial chain supply chain, it can achieve credible and ordered transmission between enterprises on chain, help enterprise to revitalize assets better, improve overall circulation efficiency of enterprises on chain and overcome hard and expensive financing problems in SMEs effectively.
VoneCredit Overcomes Financing Difficulties
Vonechain Technology notices the pain point of financing among SMEs, positively responds to national policy, empowers enterprise’s financing difficulties via blockchain technology as a situation breaker and carries out financial innovation, thus we hope blockchain cloud credit supply chain finance platform, VoneCredit developed by our company to provide one-stop solutions for the industry.
VoneCredit aims to establish a type of industrial chain finance system that provides negotiable, financeable, dividable and exchangeable electronic payment agreement receipt via core enterprise for its multi-level suppliers in upstream. This enables core enterprise’s credit to be transmitted along credible trading chain, and after suppliers in every level sign and receive the receipt given by core enterprise, they can divide it and circulate to suppliers in upper level according to real trading background. During division and circulation process, the effectiveness of endorsement in core enterprise remains unchanged, while the whole division and circulation of receipt can be stored and traced in the platform.
This solution is in correspond with application scenarios of supply chain finance, such as multi-agent participation, asymmetric information, incomplete credit mechanism and unstandardized credit object. It also makes blockchain technology perfectly applied in the scenarios.
First and foremost, VoneCredit breaks information island. Under blockchain structure, VoneCredit can achieve real time circulation and clearing of asset, on chain data record and storage, file transfer between different agencies, automatic data correction when identifying identity card and receipt based on OCR, integration of related transaction data to form complete record of agreement, payment, documents and so on in online version. Moreover, VoneCredit also establishes multi-party alliance trust system and value network which consisted of financial institution, core enterprise of industrial chain, chain enterprise, supplier and etc. in order to release credit transmission of core enterprise, reduce financing cost of SMEs on chain and facilitate positive development of whole supply chain finance ecology.
Secondly, VoneCredit helps to establish trust. Through connecting data information of every participants on chain, VoneCredit achieves online sharing of credit information and substantive trust circulation, solves credit issues of multi-level suppliers and provides effective and convenient financing channel for upstream and downstream supply chain SMEs.
Furthermore, VoneCredit can prevent risk of honoring an agreement. Via smart contract of blockchain, VoneCredit can upgrade until achieving financial pass-through regulation and participate in the whole process of fund appropriation and settlement. Platform settlement account and bank system can be directly gotten through in order to achieve speed circulation of cash flow, and at the same time utilizing bank’s settlement function to satisfy compliance requirement perfectly so that financing activities of SMEs can be developed healthily.
Conclusion
As China’s economy enters into high quality of development phase, financial services urgently need the empowerment of technology.
In August 2019, People’s Bank of China issued “Financial Technology (FinTech) Development Plan (Year 2019-2021)” which had raised clear requirements about optimizing credit financing services of enterprise:
Increase innovation strength of financial technology product services, strengthen big data analysis application of supply chain, ensure fund borrowing or lending is based on real transaction, establish supply chain finance service platform and set up industrial chain ecology via cross-industry integration, provide effective and convenient financing channel for upstream and downstream supply chain enterprises, overcome imbalance supply chain capital arrangement, reasonably lead key sectors and weak phases starting from financial resources arrangement to economic social development.
As a blockchain innovative enterprise, Vonechain Technology continuously promotes function of blockchain technology in optimizing credit financing services of enterprise, thus supply chain finance solutions, VoneCredit is developed as the main product to provide technical support as a relief for financing difficulties in various SMEs and truly achieve inclusive financing concept practice via technology.