How do Blockchain and Smart Contracts Revamp SME Lending
Getting a short-term loan can be an excruciating task, especially for the small and medium scale enterprises which do not know the strings.
It is mentioned in a Spring 2015 small business survey, that even with the advent of new-age online lending platforms, small businesses continue to find troubles while seeking capital. The survey also revealed that 45% of the loan applications were rejected more than once, and 23% were unaware of the reasons their applications were rejected.
The most notorious reason known for loan rejection is bad credit score. Often it is the borrowers that are found to be unaware about their business credit score. And even if they are aware of the score, they do not know where they could access it.
Financial institutions, on the other hand, rely on credit scoring systems that are themselves inefficient to tally the score fairly. The system leaves most of the borrowers out mainly because they are first-time loan applicants, or happen to have judged based on poor criteria. It is the classic case of poor loan portfolio management.
The lending industry is in dire need of new innovations to ensure an easy, transparent and accessible ecosystem for the SMEs. And that is where blockchain and smart contracts technology come in.
Blockchain to the Rescue
The first and the foremost example of the successful implementation of blockchain is Bitcoin. The payment system is self-efficient when it comes to maintaining and storing transaction records on a transparent public ledger. Ethereum, a decentralized platform, utilizes the blockchain technology to run smart contracts. Smart contracts are applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
WishFinance, a new Singapore-based online lending company, proposes to integrate Ethereum’s smart contract technology for listing loan portfolios in a more transparent space. It means that it will be possible for one to check the health status of the issued loans. At the same time, the privacy of users’ crucial data will be maintained.
Having the borrowers’ loan portfolios on a hack-proof ledger could serve the purpose for a transparent credit scoring system. WishFinance’s interim solution for lending industry, however, is to publish the whole history of issued loans, including currently active, paid-up and defaulted loans on the Ethereum blockchain. The company also proposes to publish the whole history of currently active loan’s performance and transactions in Tendermint blockchain.
This will make WishFinance fully transparent to the government agencies, borrowers community, partners, current shareholders and potential investors. Their transparency policy will help the borrowers, funds, current and potential investors in many ways, including predictability and accountability of the investments.
“We see blockchain as a means of doing this in a more ethical way by making businesses more efficient while ensuring clean and fair play. Here at Wish Finance, we are striving to be the first to make it real.” — states Eugene Green, the founder of WishFinance.
WishFinance proposes to be a viable alternative for SMEs looking for short-term business loans and cash advances. And with an accessible and transparent loan portfolio system on a blockchain, the company makes it possible to attract funds from hedge funds and financial institutions for a fixed low annual interest rate.
Transparency never hurts!
Take your chance to grow profits and your investment portfolio with Wish Finance. Wish Finance ICO will take place in october (see actual details and dates on the web site). Feel free to ask your questions in our official telegram chat.