Singapore and Ghana trial a new blockchain-based trade facilitation platform

Singapore and Ghana have successfully completed the first proof of concept that is aimed at boosting trade by electronically verifying the identity of small and medium enterprises (SME). Project DESFT (Digital Economy Semi-Fungible Token) is a blockchain-based system that can securely verify credentials of important documents such as licences, certificates, and trade records.

Launched in June 2023, Project DESFT is led by the Bank of Ghana in collaboration with a galaxy of Singapore-based Fintech firms such as Ample FinTech, StraitsX, and Proxtera, with support from the Monetary Authority of Singapore (MAS). The initiative is aimed boosting international trade by enhancing the confidence of foreign traders dealing with Ghanaian SMEs by providing trusted credentials and facilitating cross-border financial transactions through the use of blockchain-based crypto currencies – stablecoin and eCedi. The former is pegged to the Singapore dollar while the latter is the Ghanian central bank digital currency. Transactions are facilitated on a decentralised network using the Purpose Bound Money protocol, ensuring that funds are used solely for their intended purpose. The platform also incorporates a trade e-marketplace where international traders can connect with legitimate Ghana-based traders, manufacturers, and buyers – each of whose credentials can be verified.

The platform has been designed by the Singapore-based Proxtera and is inspired by the Open Network for Digital Commerce (ONDC) – a similar initiative that has revolutionised the digital commerce ecosystem in India. ONDC works by providing a platform that connects individuals who want to make online purchases with businesses that offer products and services. It operates using the Unified Payment Interface (UPI) system for mobile payments. Just as UPI facilitates mobile payments through different payment apps, ONDC simplifies the entire online shopping process. Project DESFT hopes to do the same.

The initial phase of Project DESFT focused on designing and developing a trusted credential system. This enables trade partners and financial institutions to efficiently verify the authenticity of SMEs' trade information, thereby reducing the friction and costs for them to conduct international business. Building on this foundation, the second phase culminated in the successful execution of a cross-border trade between Ghana and Singapore using the DESFT solution, showcased at a recent tech conference in Accra. Bilateral trade between Singapore and Ghana amounted to US$203.7m in 2022.

Singapore's top exports to Ghana included malt extract (US$11.8m), refined petroleum (US$5.89m), and large construction vehicles (US$3.99m). Meanwhile, Ghana's main exports to the city-state were cocoa beans (US$60.6m), cocoa paste (US$6.71m), and paintings (US$898,000).

Most SMEs in Ghana (and indeed across Africa) face hurdles accessing finance for working capital and scale up. They also face difficulties making international deals because of a general lack of trust and creditworthiness.

The next phase of Project DESFT will concentrate on highly automated digital credential processes, programmable payments across multiple digital currencies, and support for supply chain finance.

 

References

‘Purpose Bound Money (PBM) Technical Whitepaper’, Monetary Authority of Singapore, 20 June 2023

‘Ghana and Singapore conduct semi-fungible token trade trial’, CIFDAQ, 22 May 2024

‘Bank of Ghana announces successful completion of cross-border trade using digital credentials’, Bank of Ghana, 12 June 2024

‘Bank of Ghana completes cross-border trade using digital credentials’, The Paypers, 14 June 2024

‘Project DESFT: Build trusted digital credential for inclusive finance’, Ample FinTech, Accessed 26 June 2024

‘Singapore/Ghana’, OEC, Accessed 26 June 2024