The Role of FinTech in Mitigating Information Friction in Supply Chain Finance

Lee, Hsiao-Hui; Song, Yang; Kim, Kijin

doi:10.2139/ssrn.3465308

Cited by 5 publications

(5 citation statements)

References 13 publications

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“…The role of technology was highlighted in a recent ADB study (ADB 2019b) to mitigate the trade finance gap by managing process inefficiency, information asymmetry, and regulatory compliance. Lee, Yang, and Kim (2019) provided supportive evidence that fintech and reduced information friction can help lower the probability of a good firm being misclassified as bad.…”

Section: Mitigating Knowledge Gap In Trade Financementioning

confidence: 87%

Toward Inclusive Access to Trade Finance

2022

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The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

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Section: Mitigating Knowledge Gap In Trade Financementioning

confidence: 87%

Toward Inclusive Access to Trade Finance

2022

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“…Such cost is relatively large when transacting with smaller businesses considering the small amount and infrequent transactions involved. Lee, Yang, and Kim (2019) argue that fintech could improve supply chain finance efficiency by reducing the probability of misclassifying good firms as bad.…”

Section: Discussion Of Findingsmentioning

confidence: 99%

Financial Inclusion in the CAREC Region: Promoting Fintech to Meet Underserved Needs in Trade Finance

Kim¹,

Lee

Gaspar

et al. 2021

SSRN Journal

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Trade financing inadvertently falls short to the needs of even the viable transactions from smaller firms, unmet demand expected to reach around $2.4 trillion by 2025 if effective solutions are not in place. In 2018, 57 percent of trade finance applications from firms in Central Asia Regional Economic Cooperation (CAREC)-mostly from the Kyrgyz Republic and Pakistan-were rejected, almost half of which no longer seek alternative finance, altogether withdrawing from a potentially viable trade activity. Applying the Heckman two-step correction to analyze a cross-section of firms in various waves of the ADB's Trade Finance Gaps, Growth, and Jobs Survey, the paper validates that smaller firms experience higher incidence of trade finance rejections relative to larger firms, owing largely to their weak company financial health and history. Interestingly, results suggest potential of fintech in reducing the incidence of trade finance rejections disproportionately experienced by smaller firms, thus advancing financial inclusion. The paper maps the financial ecosystem in CAREC member countries and explores the potential opportunities and limitations of fintech adoption and entry points for intraregional cooperation. Policy proposals put strong emphasis on efficient financial structures, effective regulatory frameworks, and the needed capabilities to advance inclusive trade and finance.

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“…239 FinTech-enabled procurement solutions could easily share blockchain and distributed ledger information to international parties. 240 The tokenization of assets could reduce information and transaction costs. 241 New FinTech-related law could also revitalize international efforts to simplify the law covering such trade.…”

Section: Preventing a Free-for-all In International Procurement Stand...mentioning

confidence: 99%

How Should Public Procurement Law Deal with FinTech?

Michael

2021

SSRN Journal

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FinTech --along with the blockchain, other distributed ledger, smart contract, and tokenization usually assumed to accompany it --could change the way governments procure goods and services. Procurement authorities and procurement law can play a vital role in the development of FinTech. They can help build the FinTech platforms and ecosystems that help them engage in public procurement. They should not try to procure such FinTech outright. At the national level, regulators should not just leave FinTech rulemaking up to financial regulators. Contracting authorities should not just develop or use their own selected FinTech applications willy-nilly. They should contribute to overall changes in procurement law -which extend far beyond simple supervisory or regulatory technologies (RegTech/SupTech). Governments should get serious about the Agreement on Government Procurement and similar treaties -by creating a new authority to help develop the law needed to put FinTech-enabled procurement platforms in place. China's own world-leading FinTech and cross-border public procurements do not always contribute to a global level playing field. Any FinTech applications facilitating public procurement should thus encourage compliance with the procurement law legal principles the international community has developed over decades.

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The Role of FinTech in Mitigating Information Friction in Supply Chain Finance

Cited by 5 publications

References 13 publications

Toward Inclusive Access to Trade Finance

Toward Inclusive Access to Trade Finance

Financial Inclusion in the CAREC Region: Promoting Fintech to Meet Underserved Needs in Trade Finance

How Should Public Procurement Law Deal with FinTech?

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