• Wednesday, May 29, 2024
businessday logo

BusinessDay

How Interswitch blockchain service eases pressure on low SME financing

businessday-icon

Interswitch in partnership with Microsoft, unveiled a supply chain financing service that rides on blockchain technology on the first week of November. The first of its kind innovation has an ambition to practically reduce the pressure that small businesses face in accessing funding from big financial institutions like banks.

Easy access to finance is a major problem facing many small businesses in Nigeria and perhaps the rest of Africa. Many of them have gone out of business for not being able to get funding. In view of that, financial technology (fintech) startups came up with different solutions aimed at increasing access to funding by reducing the documentation requirements that traditional institutions will usually request.

With Blockchain however, the traditional financial institutions can fund small businesses without fear of the high risk.

Interswitch explained in a statement that the service which is built and hosted using the Microsoft Azure Blockchain platform brings together entrepreneurs, big financial players and corporates organisations to provide end-to-end visibility that ensures fast and seamless trade financing in supply chain operations.

It is not only the first time such a service is offered in Nigeria, it is also epoch-making in the sense that it is the first time corporate entities including traditional financial institutions are openly embracing blockchain technology. The Interswitch blockchain service highlights the point that there are more uses of the technology beyond cryptocurrencies.

READ ALSO: Interswitch Group bags Sub-Saharan Africa Rising Star Award

Cryptocurrencies have become the only way most individuals and even businesses define blockchain technology. Blockchain technology, however, refers to an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value. The blockchain database is not stored in any single location, in other words, the records it keeps are truly public and easily verifiable.

By leveraging the Microsoft Azure Blockchain technology, Interswitch gives financial institutions that are willing to lend or finance small businesses the leverage to monitor their investments. It not only provides security as lending institutions now have a way to verify their investments, it also ensures transparency. There is also reduction in the risk of fraud and ensuring that investments are tailored to actual needs which eliminates waste of resources.

According to the Interswitch’s statement, small to middle-sized businesses can access more funding in a shorter time (up to three weeks) from participating banks such as United Bank for Africa (UBA), Guaranty Trust Bank Plc (GTBank) and Zenith Bank Plc while benefiting from increased sales cycles from participating corporations like Dangote Group.

“In our 15 years of operation, we have experienced the bottlenecks associated with the existing corporate-based financing infrastructure in Nigeria,” Mitchell Elegbe, group managing director and chief executive officer Interswitch noted. “This is why we are happy to partner with Microsoft, by leveraging the advanced technology of the Microsoft Azure Blockchain, to prove the possibility of building a distributed ledger that is practical, viable and has the propensity to solve some of Nigeria’s most difficult financial and logistic problems.”

Launched in May, 2018, the Microsoft Azure Blockchain integrates Microsoft Flow and Logic Apps – which offer hundreds of connectors to thousands of applications – to make the creation of blockchain apps easier.

“Blockchain empowers the next step – enabling a single, authentic data set shared across counterparties,” Matt Kerner, general manager of Microsoft Azure said in an interview. “This is already improving the way transactions happen.”

Transaction enquiries and verifications on the Interswitch Block platform are handled by authorised officials from participating entities, without the incentives of a cryptocurrency.

“This will be the first enterprise-grade blockchain service in Nigeria, and one of only a handful of production blockchain applications in use by banks and corporate globally,” Michael Glaros, principal program manager, Microsoft said in a statement. “The blockchain technology is still in its infancy in Nigeria and we are happy to pioneer its deployment in partnership with Interswitch, an innovative and forward-thinking company which has evolved its business around financial technology.”

By making access to funding easier, Interswitch is not only enabling small businesses to scale their operations, the most impact will be in the creation of new employment opportunities.