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Distributed Ledger Technologies (DLT), an umbrella term that includes blockchain, might be essential for reducing the global trade finance gap by $1 trillion and removing financing barriers for small and medium-sized enterprises (SMEs) and emerging markets, the World Economic Forum (WEF) concluded in a joint study with Bain & Company. The study, published on Thursday, discussed the impact of the so-called Fourth Industrial Revolution on trade flows and supply chains across the globe.

The document mentioned several innovative technologies including AI, Advanced Analytics, robotic process automation, and the Internet of Things. However, the focus was on DLT, which took a separate chapter. The Geneva-based non-profit organization said that blockchain would be efficient especially in emerging markets and for SMEs, and not just developed countries and large companies.

According to Asian Development Bank, the global trade finance gap in 2017 was at $1.5 trillion, which is 10% of merchandise trade volume. SMEs represent three-quarters of the total trade gap. The figure is expected to grow to $2.4 trillion by 2025. WEF estimated that this gap could be reduced by $1 trillion if distributed ledger technologies are implemented more broadly. DLT’s special features, like smart contracts and single digital records, might help reduce credit risk, remove trade barriers, and cut costs.

Gerry Mattios, Expert VP at Bain & Company, commented:

“The benefits of adopting DLT in trade will affect everyone from banks to companies to governments to consumers. But action has to be taken in a collaborative way and with an ecosystem approach in mind. Individual actions won’t bring the expected results.”

If the study’s recommendations are considered on a larger scale and the expected results become a reality, it would be one of the first instances when DLT benefits SMEs and emerging markets rather than big corporations.

Wolfgang Lehmacher, who leads the Supply Chain and Transport Industry at the World Economic Forum, concluded:

“Implementing blockchain-based solutions can eventually do more for SMEs in emerging markets than removing tariffs or closing trade deals.”

In January, we reported that the WEF supported the Canadian government in an experimental blockchain-based airport system to help travelers share personal data in advance.