City Bank has become the first Bangladeshi bank to execute a cross-border letter of credit (L/C) transaction under a Shariah-based financing arrangement executed using blockchain technology on the Contour network.

Not to be confused with global banking giant Citi, which invested in and joined the Contour network in August 2020, City Bank is private commercial bank headquartered in Bangladesh's capital, Dhaka.

ITFC partnership

In this transaction City Bank partnered with the trade solutions arm of the Islamic Development Bank (IsDB) Group, the International Islamic Trade Finance Corporation (ITFC), which was both the advising as well as the financing bank.

The ITFC financed the L/C under its Murabaha Trade Finance line with City Bank.

Speedy processing

Processing time for the transaction was extremely short, with L/C draft initiation to issuance and advising taking just 38 minutes compared with the typical 24 to 72 hours required for regular cross-border LC/s according to City Bank.

The L/C was issued on behalf of Bangladeshi garment manufacturer, Debonair Group, for imports of accessories from a Hong Kong-based exporter, Apparel Link (HK).

Remote benefits

As all related parties and clients are members of the Contour network, they could see and share all relevant information without visiting banks in person. This is seen as one of the potentially huge benefits of digital L/Cs in the context of business interruptions forced on banks and businesses by the coronavirus pandemic.

In this transaction, Apparel Link was advised by ITFC even though it has no physical presence in Hong Kong.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.