| Author: | Wong, Wai Shan |
| Title: | In what way can decentralized finance reinvent a supply chain ecosystem? A study of progressive DeFi solution for SME-based supply chain in Hong Kong |
| Advisors: | Xu, Xin (MM) Wei, Steven (AF) |
| Degree: | DFinTech |
| Year: | 2024 |
| Subject: | Business logistics -- Finance Small business -- China -- Hong Kong -- Finance Finance -- Technological innovations Finance -- Technological innovations Blockchains (Databases) Hong Kong Polytechnic University -- Dissertations |
| Department: | Faculty of Business |
| Pages: | 188 pages : color illustrations |
| Language: | English |
| Abstract: | Technological advancements continually reshape businesses. Distributed Ledger Technology (DLT) enables decentralized finance (DeFi) to establish a transparent financial system. Many studies have examined how DeFi and decentralized applications (DApps) can be customized for small and medium-sized enterprises (SMEs), including e-wallets, stablecoins, and flash loans. Nevertheless, limited studies have extensively explored DeFi's impact on SMEs, especially within supply chain management. This thesis aims to examine how blockchain technology and smart protocols can assist SMEs in Hong Kong in managing their supply chains for better access to financing. An examination of the impacts and obstacles of blockchain-based decentralized financing for SMEs was conducted in a pilot project called MiDFi, spearheaded by a Japanese financial institution in Hong Kong. This project concentrated on supply chain finance (SCF) for SMEs. By 2021, the project implemented a blockchain-based DeFi supply chain ecosystem, enabling detailed development analysis not available elsewhere. In this thesis, multiple regression analysis and the difference in differences model are conducted to evaluate whether DeFi can help SMEs along the supply chain improve operational efficiency, followed by evaluating the effectiveness through genetic algorithms (GA) in machine learning (ML) to optimize process optimization across diverse sectors. With the rise of globalization and digitization, SMEs have grown in prominence, with e-commerce becoming an integral part of quick commerce (Q-commerce). SCF helps manage cross-border transactions, reducing the complexity of global markets. A DLT platform ensures efficient digital engagement through DeFi adaptation. In the DeFi domain, there are a number of DeFi protocols available, each with unique capabilities. Protocols mirror conventional financial services, spawning a broad range of tokens and initiatives that form the foundation for this diverse ecosystem. Among them are peer-to-peer lending and borrowing, decentralized exchanges (DEXs), yield farming, and stablecoins. DeFi allows SMEs to engage in secure, transparent transactions with suppliers, manufacturers, distributors, retailers, and investors. By integrating into capital markets and traditional financial services, DeFi presents alternatives to conventional economies, addressing issues like control centralization, limited access, inefficiencies, and lack of interoperability. It also breaks down barriers to financial inclusion and promotes fairness in financial transactions, including clearing, settlement, and contract execution. As DeFi gains popularity and its Total Value Locked (TVL) increases, the line between centralized and decentralized finance may blur in the future. However, SMEs face challenges in adopting DeFi due to a lack of knowledge, unstable stablecoin mechanisms and the absence of compliance standards. This thesis aims to equip industry participants with insights to optimize strategies, manage risks, and adapt practices for successful DeFi implementation and adaptation. DeFi for SCF was developed to alleviate financial obstacles faced by SMEs, as well as information asymmetries among SCF lenders. The study examined the role of DeFi in SCF for SMEs, addressing issues like restricted access to affordable finance, information disparities, delays in traditional processes, and intermediary dependence. The study contributes both to scholarly investigations and real-world implementation by examining DeFi's impact on SCF. It marks a significant milestone in integrating DeFi into blockchain-based SCF infrastructure for SME supply chains. Finally, this thesis is expected to contribute to advancing research on enhancing the comprehension and regulation of DeFi business logic for all stakeholders, as well as exploring the impact of interactions between traditional and digital financial markets on DeFi adoption. |
| Rights: | All rights reserved |
| Access: | restricted access |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| 7814.pdf | For All Users (off-campus access for PolyU Staff & Students only) | 3.13 MB | Adobe PDF | View/Open |
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