The Agricultural Bank of China (ABC) has issued its first blockchain loan worth about $300,000 backed by a piece of farmland in the Guizhou province.
State-owned ABC – the world’s fourth-largest bank – is planning to “build blocks with local people, pilot land and resources bureaus, and agriculture and animal husbandry bureaus” through the blockchain system.
It says the loan is aimed at supporting the “local tea industry”.
A provincial branch of the People’s Bank of China and other financial entities participated as nodes in the blockchain loan experiment to monitor the validity of the credit data.
In the future, other types of loans will come under the auspices of the blockchain, the decentralised ledger technology allowing ABC to prevent the issue of clients applying for loans at different banks using the same piece of land as collateral, the bank says.
The so-called E-Blockchain Loan will be, according to ABC, ideal as a solution to the complicated loan process in China, where credit approvals take weeks and even months.
The blockchain system will also save thousands of dollars by eliminated costs, such as legal and underwriting fees while making it easier for the bank to verify if loan applicants are attempting to borrow money on a portion of land already used in borrowing from other financial institutions.
ABC adds that it will expand the E-Blockchain Loan solution to other branches after reviewing the results of the initial trial runs. It also says it will use the same system for other types of loans.
This is reportedly the second time any bank around the globe has used blockchain for loans. Spanish bank BBVA successfully carried out the first pilots in the world of a loan and a financial institution using blockchain; the bank announced earlier this month.
Through the open ledger technology, BBVA granted Spanish giant construction firm ACS Group a long-term-bilateral corporate loan worth €100 million (£89 million).