TraFiGuard — Global Supply Chain Trade Finance Made Inclusive.

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TraFiGuard is positioning itself to be a platform for decentralized trade financing solutions for micro, small and medium enterprises across the globe. The proprietorship for these businesses especially in areas of under banked societies, such as India's textile industry, there is a high demand for formal finance in the form of trade financing for them to gain access to the global market. These companies are small and under banked, they deal in exports such as Nutraceuticals, Textiles and Food and imports like Electronics, Chemicals and Raw Materials.

The Problems:

Current process for trade financing
Current process for trade financing

The current process is inefficient and ineffective in accommodating the needs for SMEs in these areas. A considerable proportion of international trade is financed through banks. In order to draw credit, the buyer is required to first ship the contracted goods and then submit the appropriate documentation to the bank. The obvious issue with this process is that the exporter does not have access to the line of credit provided by the buyer/financier until after the goods are shipped. Which means that the exporter is forced to look elsewhere for trade financing which is often informal and/or expensive.

The Solution: — TraFiGuard

What if we were able to give the exporter access to the line of credit to finance the shipment? This would remove the need for a third party’s involvement in this transaction. So, how do we do this?

  1. The buyer and the seller agree on the transaction.
  2. The Seller, using Bloom (Decentralized Identification), verifies their ID to a smart contract connected via the share kit and Chainlink oracles to get the data on chain.
  3. The Buyer/Financier initiates the purchase order and supplies payment for the goods to the smart contract. The funds, in USDC, are supplied to a CDP (collateralized debt position) in the Compound protocol and immediately starts to earn interest.
  4. The Seller then has the option to provide more information to the smart contract via Chainlink oracles, which in turn will evaluate a “Risk Score” that allows them increased access to the collateral provided by the Buyer/Financier. The information that can be provided are the exporter’s audited financials and a verified bill of lading for the shipment.
  5. Based on the information provided by the Seller, they can take out a loan on the collateral provided by the buyer to finance the shipment.
  6. Once the shipment is complete, the outstanding loan is cleared (using flash-loans) to unlock the locked collateral which is then paid to the Seller and completing the transaction.

Simply put, this operation can provide the verifiable trust that is essential for cross boarder trade while also allowing the exporter access to trade finance that is inexpensive and transparent.

What’s next for TraFiGuard?

One major hurdle for us is the digitization of the bill of lading document to bring the information on chain.

The addition of a vessel location API would also be something that we would like to implement to provide more data to the smart contract so the users involved can monitor the activity of the shipment and trigger the closing of the vault.

If you would like to talk to the team or supply grants to the project please reach out to us on twitter or email us, we would love to hear some feedback or collaborate on any aspect of our project.