Blockchain has the potential to transform trade finance in the UAE with faster shipping and settlement as well as a reduction in transaction costs, according to a new report by Noor Bank, one of the leading Shari’a-compliant banks in the UAE.

Titled ‘The Evolving Landscape of Trade Finance in the United Arab Emirates’, the white paper was unveiled at the second session of the Noor Business Council – a thought leadership platform introduced by Noor Bank in May 2018 in the presence of 150 SME and large corporate clients. The report captures the findings of a study Noor Bank conducted in collaboration with business intelligence service provider MEED to highlight unique insights into the current trade finance landscape and assess the impact of digital tools on the industry.

The launch of the white paper aligns with the UAE’s goal to enhance its position as a global trade hub through expanding its trade infrastructure and diversifying its export mix, especially in non-oil sectors. The report sheds light on the role of ethical finance solutions in shaping the future trade mix as well as the growing importance of e-commerce on the trade finance landscape.

The white paper also underscores the significant trade growth in the UAE in 2017 riding on the back of a booming export and re-export sector. The value of global trade is expected to reach US$24 trillion in 2026, spurred by higher commodity prices and burgeoning South-South trade.

As per the report, the Asia Pacific region accounted for 47 per cent of global trade finance transactions in 2017, valued at US$2.1 trillion. Meanwhile, the MENA region with 11 per cent of all transactions has the world’s second-highest trade finance rejection rate – 18 per cent – due to the risk profile of clients and quality of applications.

John Iossifidis, CEO of Noor Bank, said: “Despite trade wars and the renegotiation of long standing agreements, trade finance remains a major driver of cross-border business operations. With the export and re-export business in the UAE recovering, we are confident that Noor Bank’s Islamic finance solutions will go a long way in promoting ethical and sustainable global trade practices.”

He added: “Our second session of the Noor Business Council convened our key corporate and SME stakeholders to discuss the state of trade finance in the UAE, and explore ways of supporting sustainable trade and enterprise.”

For his part, Kazim Ali, Head of Corporate Banking at Noor Bank, said: “Trade finance is an important segment for Noor. With trade volumes doubling in this competitive and evolving marketplace, we focus on offering a holistic solution to help our trade clients achieve operational excellence by addressing their specific needs.”

He added: “By embedding digital technology in our trade finance offerings, we seek to develop more efficient products and services for our SME customers and, in turn, enhance business processes. We are optimistic about our performance in this space and expect our trade finance business to grow 1.5 to two times faster in the next three years.”

For his part, Kazim Ali, Head of Corporate Banking at Noor Bank, said: “Trade finance is an important client offering for Noor Bank. Our focus is to offer a holistic solution to reconcile the divergent needs of buyers and sellers, in order to achieve their financial goals through customised solutions.”

He added: “By embedding digital technology in our trade finance offerings, we seek to enhance customer experience, provide higher efficiency and bring in economies of scale to our corporate and SME customers. We are optimistic about our performance and investments in this space as we expect our trade finance business to grow exponentially in the next three years.”

The event agenda also featured a panel discussion on the key findings of the white paper. Moderated by Richard Thompson, Editorial Director at MEED, the session explored the prospects of ethical trade finance and its impact on SMEs and large corporates. Panellists included Rafi Yachoua, Senior Strategist at Xisché & Co, Asim Siddiqui, Managing Director of AGE GROUP, Puneet Saraf, Director of Project Development and Structured Finance at Philips Capital, and Rahul Jayakar, Global Transaction Services (GTS) Trade Head at Noor Bank.

The Noor Business Council organises quarterly forums to address challenges facing the local business community, and aims to educate key stakeholders on current issues in the banking sector, and strengthen collaboration with government entities while also helping customers connect with them.