The Agricultural Bank of China (ABC) recently revealed that they issued a farmland loan worth $300,000 on the blockchain in a trial, according to a local news source. The bank used a segment of the agriculture land as collateral to issue the mortgage in one of its Guizhou province branches. Once the loan was passed, the bank distributed the details of the loan to other node partners that include various commercial banks, Guizhou’s Land and Resources Bureau and even the People’s Bank of China.
This is a significant breakthrough because this will act as a case study as to how the banks can use the blockhain technology to make the entire process of loaning efficient. The ABC is calling this new blockchain solution, E-Blockchain Loan. Without the blockchain solution, the bank has to go through several processes that involve intermediaries at every step. Because of that, it takes the bank weeks and even months to approve the loan to a potential borrower.
With this solution, ABC could potentially save thousands of dollars for themselves and for the intermediaries as well by eliminating the costs that are incurred from legal fees to underwriting.
Not only that, according to the bank, this would also make it easier for them to share the borrowers’ data across the banking system. This would reduce fraud because now the banks would be able to quickly cross-check to verify if the potential borrower is taking out a loan on the same portion of land from a different financial institution.
The blockchain solution would also allow the banks to get rid of internal fraud as well. Because since the data on the blockchain cannot be tampered, there is no way a person can tamper their information on a particular node. This would make it easier to maintain the integrity of the information while making it impossible for a hacker to just find a single point of failure and tamper or steal the information unless the hacker is using a quantum computer because then they can hack into any blockchain network and tamper information. Check out our report about how quantum computers could efficiently hack cryptocurrencies and blockchain networks.
The real benefit of the blockchain solution is for the farmers in China. With the E-Blockchain Loan, ABC would be able to offer quick and easy access to farmland mortgage loans. So basically the farmers will be able to get faster loan approval without having to stand in long queues in brick and mortar bank branches.
Right now the blockchain solution is in the testing phase and depending on how this goes, the banking giant will be expanding their blockchain solution to other branches as well. ABC is also planning to add other loanable assets as well such as real estate, etc.