Ba Shusong, Peking University: How can blockchain empower rural finance?

China Rural Finance Magazine's public account published Professor Ba Shusong's article "Blockchain empowers rural finance with great potential". This article is the keynote speech of Professor Ba at the 2019 Annual Meeting of the Advisory Committee of China Rural Finance Magazine. Because it is a speech rather than a essay or a landing plan that resorts to words, some content inevitably has problems of insufficient expression and unclear expression. Now, I discuss with Professor Ba in the 7 areas of blockchain-enabled rural finance proposed by Professor Ba in the article. From the perspective of the application, I discuss with Professor Ba. What's wrong, I also invite Professor Ba and other experts to criticize it.

For the sake of clarity, this article uses a tabular approach. "Empowered areas" are the seven aspects covered by Professor Ba's speech; "Status" is the current status of rural finance in various fields mentioned in Professor Ba's speech, that is, its existence Pain points; "Blockchain empowerment path or effect" is the blockchain transformation suggestions put forward by Professor Ba in the above 7 areas; "Application problems exist" is our blockchain transformation path proposed by Professor Ba Deliberative opinion.  

Empowered field

status quo

Blockchain empowerment path or effect

Problems with application landing

Loan technology Traditional credit methods revolve around pre-lending, during-lending, and post-lending transfers. Insufficient pre-lending data, manual processing of collateral in loans are difficult to monitor in real time, and post-lending management is difficult to keep track of. It can affect risk prevention control. If blockchain technology is applied, information data such as customer credit surveys will be more diversified and objective. The application of smart contracts and the transparency of blockchain technology will have greater compliance with collateral and timely management of loans. Improvement effect.

 

Applying blockchain technology and multi-party authentication can make the data on the chain more objective . But if the traditional pre-loan data is insufficient, how can the application of blockchain technology solve the diversity of customer credit survey data ?

If it is difficult to carry out real-time monitoring of the manual processing of collateral in traditional loans, the use of information technology and blockchain can solve the collateral compliance to a certain extent, but the premise is to realize the digitization and management of collateral. This is quite difficult for big banks , and even more difficult for rural banks .

Traditionally, it is difficult to keep track of post-loan management. If you want to realize the timeliness of post-loan management through blockchain technology, you need to digitize and informatize all aspects of the post-loan and make records on the blockchain. This is also quite difficult for the banking system .

Payment settlement Rural financial institutions have a small number of outlets, a narrow coverage, an imperfect payment system, and limited promotion and application of payment settlement services, resulting in an imbalance in supply and demand and high costs in the payment system. If blockchain technology can be applied, multiple counterparties can be connected, information can be shared, peer-to-peer transactions can be achieved, and the market's fragmentation problem can be solved, thereby greatly reducing business costs. The use of blockchain technology to achieve point-to-point transactions, to solve the problem of market fragmentation, needs to popularize payment settlement business to each node. The essence is the problem of information infrastructure construction. The realization of an advanced payment and settlement system for the information infrastructure construction represented by the blockchain can cross the development stage of rural financial institutions with fewer physical outlets and directly move towards the point- to -point transaction payment and settlement stage . Bill business At present, in the bill business, the main body of rural capital supply is single, there are few trading instruments, and the scale and issuance of bills are insufficient; financial institutions have problems such as irregular operations and illegal transactions. The phenomenon of counterfeit bills frequently occurs, making it difficult to conduct effective supervision and risk Prevention and control; The particularity of the agricultural industry determines the high credit risk of agricultural-related bills, such as the failure of the bill acceptor to pay in time. The point-to-point transfer of the blockchain can enable financial institutions in remote areas to participate in the transaction of digital bills, and at the same time connect with multi-party fund platforms through data interfaces, which can effectively alleviate the single issue of rural fund supply entities; using smart contracts can control the flow of bills. The limitation of direction and value guarantees the monitoring and traceability of each link, which is conducive to the formation of a unified market rule order in the rural bill market, and is convenient for supervision and risk prevention and control. Rural capital supply is single, there are few trading instruments, and the insufficient transaction scale and issuance of bills are caused by technical issues, policy issues, or insufficient willingness of the financial supply side? If it is a purely technical problem, the information infrastructure construction represented by the blockchain can be used to solve it. If it is another problem, the blockchain cannot solve it.

Counterfeit bills related to agriculture can be solved through the blockchain, but the premise is the blockchainization of the entire system of the bill, not just the application of smart contracts.

The high risk of agricultural-related bills is at least determined by the characteristics of the agricultural industry. The use of blockchain technology to implement supervision and prevent and control risks is based on the premise that blockchain technology must manage the entire flow of bill business. If you just manage one or more of these links, I am afraid it is difficult to solve the problem.

supply chain finance There are many companies in the supply chain, it is difficult to track and investigate each link, the information is low in transparency, there are problems of information asymmetry, long transaction cycles, complicated procedures, and high costs. The use of blockchain technology can build a trusted supply chain ecosystem, including a trinity information platform of supply chain alliances, financial institutions and government regulators. You can also use smart contracts to ensure the digitization of the transaction process, set the conditions and time for automatic payments, and simplify the transaction process, thereby improving data accuracy and work efficiency. The traditional supply chain system is difficult to track every link, and the use of blockchain technology to achieve the full tracking of the supply chain system, the premise is to realize the digitization of all links and transactions in the supply chain. Its essence is the problem of information construction . However, in implementation, because different supply chain systems have different business characteristics, there are great difficulties in the realization of digitalization of the entire process . Credit information business Due to the differences among different credit collection targets in rural areas such as farmers, self-employed individuals, and small and micro enterprises in towns and villages, credit standardization is not uniform. In particular, it is difficult for farmers to break through the restrictions on real estate rights guarantee and establish a clear credit system. In addition, the information available for investigation in rural areas is incomplete and there is no information sharing mechanism. Through the blockchain credit reporting platform, the authorized information in the original data of credit reporting agencies can be uploaded to the public chain to promote information sharing, and in terms of information security, public key encryption, private key decryption, and non-tampering can be used to prevent and control. Traditional credit reporting itself faces problems such as differences in the collection objects, inconsistent specifications, restrictions on real estate rights guarantees, incomplete information that can be investigated and investigated, and the use of blockchain technology, it is still difficult to solve these problems at the business level. Targeted poverty alleviation Many problems in the poverty reduction process are caused by asymmetric information The intervention of the blockchain can perfectly solve the corruption in the poverty reduction process. Open, traceable, and tamper-proof, this is the most valuable embodiment of blockchain in poverty alleviation. Government departments or non-profit organizations upload information such as materials and funds to be distributed and donated. The chain-up process requires verification based on the blockchain's consensus mechanism. The verification process is like putting an indelible mark on poverty alleviation funds. If any link in the middle is changed, it is easy to find clues. It is feasible to use blockchain technology to resolve information asymmetry and reduce corruption . Agricultural insurance Traditional agricultural insurance generally has “moral hazard” and “adverse selection” issues. Insurance companies need to conduct comprehensive and reliable credit evaluations of customers. This process often consumes a lot of manpower and resources, and it is difficult to have accurate customer portraits. In fact, you can use blockchain technology to establish a self-certification model, that is, to automatically verify the identity information, credit records, asset information, medical health records, and various transaction records of insured farmers; through accurate farmer information, design to meet the needs of farmers The introduction of smart contracts will make the entire insurance process transparent, which will effectively curb the occurrence of fraudulent insurance incidents. It will also improve the efficiency of compensation and reduce the time cost of farmers and insurance companies. Insurance is essentially the use of big data, not the use of blockchain.


Professor Ba has a strong insight and a high level of summary of the problems in rural finance in China. The proposed path to empower rural finance with blockchain is highly instructive. However, rural finance is likely to be the weakest link in China's financial system, with limited funds, inadequate infrastructure construction, and poor risk control capabilities. The majority of its customers are high-risk customers.

Blockchain should be the product of the development of information technology and digital construction to a certain stage. The reason why the blockchain was first applied in the financial field, we believe that the level of information and digitalization in the financial field is much higher than in other industries. Rural finance has a wide range of services, is small and scattered in the face of customer groups, and has a relatively small amount of funding. In addition, the small financial scale of rural financial institutions and insufficient investment in information infrastructure construction have led to the informatization and digitalization of rural finance. Compared with large financial institutions, the gap is large.

In view of the above, for rural finance, we believe that while deeply analyzing its current business pain points, it is also necessary to carry out targeted blockchain transformation based on the current level of information and digitalization of rural finance.