ADCB harnesses expansive ambitions in the Middle East

The impact of regional and global economic and political factors on trade volumes was the subject of much discussion during 2019. In the UAE, trade volumes declined as a result of a fall in imports of goods such as automobiles and retail goods.

However, at ADCB we have managed to grow our trade finance business over the last few years by expanding our focus across various markets for strategic trade flows. In the past we were very much focused on UAE and regional business, but since 2017 through our representative offices we have tapped into markets in Asia Pacific and across the Indian sub-continent, following our key clients. 

ADCB now has a growing number of customers whose business does not rely on trade within the UAE – for example, agricultural commodities products moving into Bangladesh from traders in the UAE/Singapore. Representative offices in Singapore and also in London have enabled us to extend our reach to commodity houses.

Large commodity firms are well aware of the benefits of trade finance and we don’t deal with those further down the supply chain because of the heightened risk. As a bank, we offer electronic presentation of documents, which reduces turnaround times for clients in terms of delivering their documents to buyers.

In our experience, companies across the Middle East are enthusiastic about pursuing international expansion. The Middle East and Gulf Cooperation Council (GCC) is relatively stagnant from a trading growth perspective, whereas trade flows between the Middle East and Africa are growing. Our SME clients are increasingly looking to explore opportunities on the African continent, and when clients do business in African markets we are able to support these flows – initially through risk mitigation structures and gradually increasing appetite based on underlying trade.

Clients are primarily interested in products that extend their working capital cycle, allowing them to borrow under letters of credit by exchanging payment terms while improving their balance sheet management. We are also seeing increasing demand for reverse factoring, with clients reducing risk by ensuring they are transparent in their financial reporting.

In addition, there is growing interest in financial institution trade loans. We are on both sides of this business, in that we borrow for our dollar requirements while other banks borrow from us in markets such as Egypt, Bangladesh and Vietnam.

Of course, digitalization of trade finance has significantly changed the way we interact with our customers. We have used digital solutions to tap into new markets and customers can submit documents via our trade portal – we no longer insist that original documents are produced at a branch counter. Customers can also directly dispatch documents to issuing banks, which reduces transit time and improves cash flow for exporters.

A company in Singapore, for example, could use the services of a Singaporean bank, but by delivering our trade finance solution through an online portal we can give them a superior service. It is clear that clients want to interact digitally – 80% of our SME customers now deal with us online and across the entire wholesale banking business (which includes large corporates) around two thirds of transactions come through the portal.

In September 2019, ADCB became the first bank in the UAE to run an end-to-end blockchain trade finance transaction with full document automation through the dltledgers platform, offering corporate customers greater confidentiality, the ability to keep a closer tab on the flow of the goods and documentation, faster turnaround and enhanced fraud prevention.

Users of trade finance across all markets are keen to find out what efficiencies blockchain platforms can yield. They are not just interested in the fraud prevention aspect of the technology; they want everyone across the supply chain to be on these platforms – including the shipping companies, buyers and insurance companies – so that it works seamlessly.