# A Blockchain Technique for Trade Credit Maintainability Using the Role of Information and Communication Technology

Authors: Faiza Shah; Yumin Liu; Yasir Shah; Ijaz Ul Haq; Muaadh Mukred; Saddam Hussain; Mahfoudh S. Alasaly
Journal: Journal of Mathematics
 (2022)

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## Abstract

Recent advances in data analysis and processing methods can improve the ability of computational applications to perform complex steps of different tasks. With the progress of information and communication technologies (ICT), Blockchain-based complex data processing for transaction analysis and smart contract agreement has become a new research area in the fields of mathematics and computation. Stability of financial sector based on the ICT is a core component for growing the economics of medium and small enterprises. This stability brings the innovation to businesses productivity, while the management of information takes more prospective for improving the efficiency and more ways for innovating the business of products. In this study, we use the autoregressive distribution lag (ARDL) model with Blockchain-based complex data processing approach to emphasize the role of ICT in the field of trade credit maintainability. Actually, the ICT connects the industries in the entire world and makes business sectors that use its technologies be more advanced. Based on the ARDL model conducted on the records gathered from 2000 to 2019, the analysis concludes that the ICT-based complex data processing is a critical component of trade credit. The statistics of ICT are chosen based on the economy penetrations through the Internet and mobile phones. The causality exposed between the trade credit and ICT is bidirectional in nature. Also, it is found that the usage of mobile phones has a substantial influence on the business sectors, as a substantial amount of trading and business transactions are conducted over the phone. Therefore, the primary concern is the association between the Blockchain and trade credit, which is thoroughly discussed in this work. The trade credit improves the stability of financial sector and the Blockchain supports its maintainability by the role of ICT. The results of the study can help the business stakeholders and investors to estimate the marketing for future useful execution.


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## Body

## 1. Introduction

Graph-based data analysis (GDA) concept is theoretically applicable in the computer science (CS) field for several practical applications. Blockchain-based complex data processing in information and communication technology (ICT) such as graph-based smart contract based agreement modelling, computing resource allocation, and users’ interactions and transaction analysis has become popular in recent years. In most parts of the world, trade credit is significant short-term funding for SME’s businesses [1, 2]. In the United States, most businesses offer their products and services based on trade credit. The trade credit is considered a major source of short-term funding in many businesses. The biggest consumers of trade credit are the nonfinancial firms as these firms are mostly facing a lack of financing. For young and emerging businesses, it is a regular source of capital [3]. The use of trade credit is so extended even after other financial banking systems [2, 4–7]. Since traders alone are often unable to find and connect with the banking sector, they are unable to take bank loans. Companies depend more on trade credit for external financing due to the same nature of business between all trading parties.Trade credit is important for small investors, and since it is the second-largest financing mechanism, the importance of trade credit is also globally recognized [8]. There have been several sorts of explanations proposed for the trade credit. As per the financial perspective, firms can obtain resources at a lower budget due to trade credit as compared to high financing costs [9, 10]. Trade credit is a short-term investment that is more profitable than marketable securities [9]. The operational motive of trade credit is that it provides smooth demands and eliminates cash volatility in the payments among firms [11]. The financial motive is that large and financially stable firms offer trade credit to smaller firms to meet their financing requirements. Large firms always have an advantage while dealing with trade credit to secure sales and build long-term relationships with small firms.Due to the Internet, the entire planet has evolved into a global community. Developed as well as developing countries are interconnected globally. Globalization identifies the merger of multiple economies and countries for economic growth and prosperity [12]. Since the beginning of the 21st century, the concept of globalization has entered into a new millennium. Both developed and developing countries are facing certain kinds of challenges related to the equilibrium between the economy and globalization. As the phrase that “the world is getting smaller” signifies the junction of transport and communication as well as the foreign trade of commodities and services, including the procurement and distribution of commodities and services [13], globalization focuses on market liberalization and economies of scale for the growth of countries around the world which foster the resource sector globally. Many developing countries get benefits from globalization, such as improved technology, the worldwide flow of advanced machinery and equipment, and improved trade operations. The natural resources, state, political stability, and cultural exchange of countries also increase economic growth and globalization [12].Information and communication technology (ICT) has always brought innovation, improves efficiency, and enhances the ability to share knowledge and skills leading to the change in overall trading and business units around the world. ICT is considered as the two poles of a single rod which are attached as it is required for sustainable economic growth in the society and also to resolve many environmental issues [14]. Now, as the world is interconnected, the ICT has also impacted every phase of life, like education, cultural aspects, business networks, infrastructures, and transportations [15]. No doubt, the use of ICT has increased as time passed by. The report generated by the worldwide telecom unit (ITU) has likewise proposed that more clients of the Internet are in the year 2015 which are 3.2 billion, when contrasted with earlier years around 400 million [16]. ICT has a major role in the growth of economy and stability of societies in both developed and developing countries [17].ICT is a becoming a reason to globally connect numerous devices. It is feasible to connect smart devices and carry on the transactions without discriminating that the user is virtually connected. There are various frameworks that support reliable and effective communications with tangible accuracy. Due to similar significance, the platform of ICT has raised the development of small and medium industries and their interconnectedness with the rest of the world. The ICT is helpful for future planning of the world economy and in information society to strengthen labor forces [18]. Various forecasting, predictions, and long-term financial planning are done by computer-aided techniques and devices. Nepal scored first in the area with ICT score of 40, followed by Bangladesh with ICT score of 39, Sri Lanka with ICT score of 32, India with ICT score of 28, and Pakistan with ICT score of 23, according to the Global Competitiveness Index [19]. Because of the above social and technological aspects, as well as the importance of information and communication technology (ICT), which is below the national average for small and medium business units, the study highlights the need for further research into ways to contribute to economic development through trade credit in South Asian countries.It is a common observation that the financial demand also grows as the firm grows in size because it plays an integral part in the elaboration and growth of economy [20, 21]. The trade credit provides the necessary infrastructure including skills and expertise in trading around the world which encourages the efficient use of the country’s resources around the globe. This paper adds to prior work in several ways. First, it is the first study to focus on the relationship between economic growth, information and communication technology, and trade credit. Second, the autoregressive distributive lag (ARDL) model is utilized to control the interactions between the stated variables in long-run behavior. To determine the results' robustness, the bound test is used [22].The remaining part of the article provides an overview of the trade credit that affects the economic structure of Pakistan. The literature review section provides the previous findings of the literature. The model specification, data source, and econometric strategies are discussed in model construction; next, the empirical analysis of the research is explained. The conclusion discusses the findings and concludes the implications, and, finally, limitations and future research direction provide suggestions for future work.


### 1.1. Overview of Trade Credit in Pakistan

Technology has now removed the concept of boundaries and limitations. The broad term global village is very well known in this regard. Due to globalization, the distances are reduced, and new business horizons are opened. The effect of ICT and globalization on trade credit is an aspect of scholarly discussion. Because of ICT, the lands have changed into new buildings and industries and there is a shift in infrastructure as observed from past decades. Due to the upgradation of infrastructure, the investor's and small business unit’s strategies are also changed. Technology like smartphones has reformed the trading mechanisms at the fingertips. Trade credit is beneficial for many reasons. The most important reason is one owner business type which occupies the biggest portion of the private sector of Pakistan. Also, trade credit is time-saving and beneficial for new business entities in a competitive environment [23]. Trade credit increases the profitability of firms [24].Particularly keeping the focus on underdeveloped countries, to improve the economic stability and growth in the country, the Pakistan government is making efforts in the power sector to fulfill the energy needs of the country. This again involves smart technology on the core end. The government has also jointly worked on different projects to bring innovations for technology productions. One of the projects is the China-Pakistan Economic Corridor (CPEC) in which the main idea is to open the western China trade through rails, roads, and gas pipelines from Kashgar to Gwadar ports of the country [25]. This is not only a road that connects regions together but also a future pathway to progress. The regional connectivity includes utility and regulation of energy hubs, logistic refinements, high level trading, the regional promotion, various domains like tourism, maintenance of peace, and prosperity, diverse investment schemes, and industrial boosting. There are indirect chances of improvement in education, internal infrastructure like medical, human resource development, basic human needs development and support, social diversity and collaboration, and so forth. China is investing about $46 billion in the energy sector and the development of the transportation infrastructure in Pakistan [26]. This joint venture may bring revolutionary progress in financial gains as well as technology refinements around the country.The use of information and communication has been widely spread over the past few years. Not only is ICT as important as the human heart but also it adds a significant part in growth, education, health, and the way of living of the population [27]. Ultimately, ICT is bringing enormous productive results in trade credit which is beneficial for the SME. In today’s emerging markets, ICT plays two types of roles: inputs and outputs. As input, ICT reduces the coordination cost in markets and results in inefficient trading and, as output, ICT becomes a source for public services like education and health sector and provides e-services in many departments [28]. It means the future is broad and progressive where finance is equally supported by technology.One of the best reasons for trade credit based infrastructure is that it is facilitating for SMEs. This ensures the sustainability of any small organization, which is continuously making efforts to grow gradually. This strategy is based on the phenomena that there are no financial reservoirs, no fixed assets, and no regular income. The system is entirely relying on trade credit where the goods are sold under fixed terms and the turnout is returned to the company. This system needs worthy and trust building system where the producer organizer hands over the product to the seller organizer for a tangible duration under fixed term returns. This facilitates the load of small organization to involve services at minimum to no cost and the product is launched to the market as soon it is completely manufactured. The consumer later gets the profit which is the ultimate target of the business. So, the scheme is ideally applicable to both entities.


## 1.1. Overview of Trade Credit in Pakistan

Technology has now removed the concept of boundaries and limitations. The broad term global village is very well known in this regard. Due to globalization, the distances are reduced, and new business horizons are opened. The effect of ICT and globalization on trade credit is an aspect of scholarly discussion. Because of ICT, the lands have changed into new buildings and industries and there is a shift in infrastructure as observed from past decades. Due to the upgradation of infrastructure, the investor's and small business unit’s strategies are also changed. Technology like smartphones has reformed the trading mechanisms at the fingertips. Trade credit is beneficial for many reasons. The most important reason is one owner business type which occupies the biggest portion of the private sector of Pakistan. Also, trade credit is time-saving and beneficial for new business entities in a competitive environment [23]. Trade credit increases the profitability of firms [24].Particularly keeping the focus on underdeveloped countries, to improve the economic stability and growth in the country, the Pakistan government is making efforts in the power sector to fulfill the energy needs of the country. This again involves smart technology on the core end. The government has also jointly worked on different projects to bring innovations for technology productions. One of the projects is the China-Pakistan Economic Corridor (CPEC) in which the main idea is to open the western China trade through rails, roads, and gas pipelines from Kashgar to Gwadar ports of the country [25]. This is not only a road that connects regions together but also a future pathway to progress. The regional connectivity includes utility and regulation of energy hubs, logistic refinements, high level trading, the regional promotion, various domains like tourism, maintenance of peace, and prosperity, diverse investment schemes, and industrial boosting. There are indirect chances of improvement in education, internal infrastructure like medical, human resource development, basic human needs development and support, social diversity and collaboration, and so forth. China is investing about $46 billion in the energy sector and the development of the transportation infrastructure in Pakistan [26]. This joint venture may bring revolutionary progress in financial gains as well as technology refinements around the country.The use of information and communication has been widely spread over the past few years. Not only is ICT as important as the human heart but also it adds a significant part in growth, education, health, and the way of living of the population [27]. Ultimately, ICT is bringing enormous productive results in trade credit which is beneficial for the SME. In today’s emerging markets, ICT plays two types of roles: inputs and outputs. As input, ICT reduces the coordination cost in markets and results in inefficient trading and, as output, ICT becomes a source for public services like education and health sector and provides e-services in many departments [28]. It means the future is broad and progressive where finance is equally supported by technology.One of the best reasons for trade credit based infrastructure is that it is facilitating for SMEs. This ensures the sustainability of any small organization, which is continuously making efforts to grow gradually. This strategy is based on the phenomena that there are no financial reservoirs, no fixed assets, and no regular income. The system is entirely relying on trade credit where the goods are sold under fixed terms and the turnout is returned to the company. This system needs worthy and trust building system where the producer organizer hands over the product to the seller organizer for a tangible duration under fixed term returns. This facilitates the load of small organization to involve services at minimum to no cost and the product is launched to the market as soon it is completely manufactured. The consumer later gets the profit which is the ultimate target of the business. So, the scheme is ideally applicable to both entities.


## 2. Literature Review

The literature is reviewed under three subdivisions. The first and most important subdivision has revealed reviews that deal with the qualities of ICT in accelerating economic growth. Next, the second subdivision highlights the findings on trade credit and the growth of the economy. The third subdivision discloses findings on the topics connected with significance of ICT and trade credit.The existing literature has enlightened the association between ICT and economic growth. Because of ICT, there expanded the decisions for individuals, simple way to deal with the information and skill, and that actions that are important and agreeable to make life more agreeable [29, 30]. The use of electronic facilities including health, education, and services to bring access to these facilities makes economic development in the societies. E-health benefits raise the health standards of the individual and improve outcomes, help in cost reduction, and extend services [31, 32]. Therefore, ICT brings positive changes in human capabilities which are necessary for the prosperity of the economy [15]. The importance of economic growth is related to economic efficiency [33].The second component of the study focuses on the association between trade credit and economic growth. Several studies have highlighted the importance of trade credit in developing countries [34]. The rapid increase in the demand for industrialization and urbanization is moving the economy to find out easy and fast ways of financing; trade credit is the most effective way of financing [35]. The macroeconomic conditions have a positive effect on trade credit usage and many researchers highlighted its importance [36, 37]. The world’s largest retailer, Walmart, is the biggest user of trade credit and prefers it over a bank loan [38, 39]. The trade credit is also considered as a key source for new and young firms because supplier firms have more information about buyer firms [40]. It also provides a source of short-term financing to financially constrained firms [41]. As per [42], globalization leads to long-term economic efficiency; therefore it has a substantial influence on economic growth.The third component of the literature concentrated on the association between ICT and trade credit as the main characteristic of global industrial growth. As demonstrated earlier that the entire planet has evolved into a global community because every firm is connected through technology, all the trading is interconnected through reliable Internet connections. Even online businesses are expanding worldwide. Huge financial transactions can be processed in the nick of time [29]. ICT has effects on international trading, urbanization, and advanced technology [43]. Trade credit supports industry-level growth having less developed financial access in the country; also, it results in financial gains for both buyer firms and supplier firms [44, 45]. Because of the increase in sales or market share, facilitating financial transactions by reducing restrictions and easy-going policies for payment, supplier firms can benefit from generating additional revenue [5]. Global trading can be seen flawlessly in the widespread pandemic. Due to the spread of Coronavirus disease (COVID-19), where life is threatened, the small industries are most affected in developing countries [46]. In this critical time, trade credit is the most effective and useful way of financing throughout the world. This sort of business can be channeled from any part of the world and is interconnected with the rest of the world through technological advancements.Despite these valuable contributions, there are many areas to be further discussed. For example, trade credit and its importance for small and medium enterprises (SMEs) are highlighted [34]. The risk factor associated with trade credit is discussed but the ICT factor is not considered [34]. To fill this gap in the research, the existing body of knowledge adds to the existing information of economics by observing the ICT, trade credit, and their effects on the economic growth of Pakistan.


## 3. Construction of the Model and Econometric Strategy

In this section, the construction of the model and econometric strategy and the data sources are stated, for the empirical implication of the above literature. Specifically, the main objective of this study is to establish the role of ICT and trade credit in the economic growth of Pakistan. The trade credit approach is ideally applicable for the underdeveloped countries where there are less financial assets and the services can be the alternatives. Countries like Pakistan, India, Bangladesh, Ghana, and so forth are the best examples for this model. Larger business units like leather, minerals and mining, textile, chemical, and mechanical units, and similar industries which produce the consumable products on regular basis are some common examples in Pakistan which regulate trade credit support. The financial support is never foreseen in this area; also the reasons like natural disasters, political instability, corruption, unemployment, and similar reasons raised uncertainty. In this concern, the trade credit is not less than a blessing for the survival and even the improvement of the SME. As is usual in most of the econometric studies, all variables were transformed into logarithms. The logarithmic transformation also eliminates the possibility of heteroscedasticity.


### 3.1. Equations

(1)LogTCt=β0+β1tLogICTt+β2tLogGDPt+β3tLogGLOB+εt,where TC is the trade credit index, GDP is the measure of growth of economy, GLOB is short for globalization, ICT is the information and telecommunication technology index, and ε is the residual error, where t stands for the years. Considering obvious motive for the selected variables, ICT in international trading yields industrialization and urbanization, thus enhancing the trade credit in the country. Trade credit not only enhances economic development and stability but also boosts social development by the interaction of SME investors in the country. Cross-border trade benefits the manufacturing sector; so, it is helpful to influence the economic growth in the country. Different types of econometric techniques are used and applied to observe long-run and short-run relationships among variables (Engle and Granger) [47]. The appropriate technique is the ARDL approach as is applied and suitable for a mostly small set of data to check the cointegration association. Also, the bond test method of ARDL is used as a simple linear transformation for simultaneous use of the long and short run. The correct lag should be calculated before applying the ARDL technique. The procedure for performing bound testing on the variable of interest is as follows:(2)ΔLogTC=β0TC+∑k=1nβ1kΔLogTCt−k+∑k=0nβ2kΔLogICTt−k+∑k=0nβ3kΔLogGDPt−k+∑K=0Nβ4kΔLogGLOBt−k+λ1TCΔLogTCt−1+λ2TCΔLogICTt−1+λ3TCΔLogGDPt−1+λ4TCΔLogGLOBt−1+ε1t,where Δ indicates primary variance, λ expresses the long-run measurements, θ represents the dynamics of small path, and ε denotes the error. Meanwhile the null assumption explains that there does not exist cointegration, besides the substitute hypothesis.


### 3.2. Model Estimation

F-statistics are used to test cointegration in the ARDL approach. The decision is based on the upper and lower bounds [48]. If the F-statistics are more than the upper value, the null hypothesis is refused, and if the F-statistics fall somewhere between the upper and lower boundaries, the result will be inconclusive. The next process after cointegration is to examine the paths term. The model's stability is verified using several tests such as ARCH, LM, and Ramsey tests.The Granger causality test is the most extensively used test for time and panel data. The analysis was used to decide whether variables can also be used to predict other variables. According to Engle and Granger [47], there is a cause-and-effect link between the variables. The test is used to determine which way trade credit, information and communication technology, and economic growth are causally related. This causality is helpful for policy suggestions. The Granger causality model is expressed in matrix equation as follows:(3)LogTCLogICTLogGDPLogGLOB=β1β2β3β4=β11kβ12kβ13kβ14kβ15kβ16kβ21kβ22kβ23kβ24kβ25kβ26kβ31kβ32kβ33kβ34kβ35kβ36kβ41kβ42kβ43kβ44kβ45kβ46k=LogTCitLogICTitLogGDPitLogGLOBitn1n2n3n4=ectit−1+ε1tε2tε3tε4t.ECt−1 indicates that the long-run causality exists among variables and specifies that the pathway is the first difference of the short-run causal relationship that ICT has a contributing connection with trade credit, and trade credit has an association with ICT, respectively. As a result, bidirectional causation develops between the two variables. For the study, time-series data covering the years 2000 to 2019 was employed. Data on trade credit is taken from nonfinancial enterprises' financial statements in Pakistan; ICT is calculated by mobile phone and Internet penetration rates and GDP.


## 3.1. Equations

(1)LogTCt=β0+β1tLogICTt+β2tLogGDPt+β3tLogGLOB+εt,where TC is the trade credit index, GDP is the measure of growth of economy, GLOB is short for globalization, ICT is the information and telecommunication technology index, and ε is the residual error, where t stands for the years. Considering obvious motive for the selected variables, ICT in international trading yields industrialization and urbanization, thus enhancing the trade credit in the country. Trade credit not only enhances economic development and stability but also boosts social development by the interaction of SME investors in the country. Cross-border trade benefits the manufacturing sector; so, it is helpful to influence the economic growth in the country. Different types of econometric techniques are used and applied to observe long-run and short-run relationships among variables (Engle and Granger) [47]. The appropriate technique is the ARDL approach as is applied and suitable for a mostly small set of data to check the cointegration association. Also, the bond test method of ARDL is used as a simple linear transformation for simultaneous use of the long and short run. The correct lag should be calculated before applying the ARDL technique. The procedure for performing bound testing on the variable of interest is as follows:(2)ΔLogTC=β0TC+∑k=1nβ1kΔLogTCt−k+∑k=0nβ2kΔLogICTt−k+∑k=0nβ3kΔLogGDPt−k+∑K=0Nβ4kΔLogGLOBt−k+λ1TCΔLogTCt−1+λ2TCΔLogICTt−1+λ3TCΔLogGDPt−1+λ4TCΔLogGLOBt−1+ε1t,where Δ indicates primary variance, λ expresses the long-run measurements, θ represents the dynamics of small path, and ε denotes the error. Meanwhile the null assumption explains that there does not exist cointegration, besides the substitute hypothesis.


## 3.2. Model Estimation

F-statistics are used to test cointegration in the ARDL approach. The decision is based on the upper and lower bounds [48]. If the F-statistics are more than the upper value, the null hypothesis is refused, and if the F-statistics fall somewhere between the upper and lower boundaries, the result will be inconclusive. The next process after cointegration is to examine the paths term. The model's stability is verified using several tests such as ARCH, LM, and Ramsey tests.The Granger causality test is the most extensively used test for time and panel data. The analysis was used to decide whether variables can also be used to predict other variables. According to Engle and Granger [47], there is a cause-and-effect link between the variables. The test is used to determine which way trade credit, information and communication technology, and economic growth are causally related. This causality is helpful for policy suggestions. The Granger causality model is expressed in matrix equation as follows:(3)LogTCLogICTLogGDPLogGLOB=β1β2β3β4=β11kβ12kβ13kβ14kβ15kβ16kβ21kβ22kβ23kβ24kβ25kβ26kβ31kβ32kβ33kβ34kβ35kβ36kβ41kβ42kβ43kβ44kβ45kβ46k=LogTCitLogICTitLogGDPitLogGLOBitn1n2n3n4=ectit−1+ε1tε2tε3tε4t.ECt−1 indicates that the long-run causality exists among variables and specifies that the pathway is the first difference of the short-run causal relationship that ICT has a contributing connection with trade credit, and trade credit has an association with ICT, respectively. As a result, bidirectional causation develops between the two variables. For the study, time-series data covering the years 2000 to 2019 was employed. Data on trade credit is taken from nonfinancial enterprises' financial statements in Pakistan; ICT is calculated by mobile phone and Internet penetration rates and GDP.


## 4. Results of Empirical Research

The first and most critical step in any study is to ensure that the data is stationary. This is accomplished through the use of the unit root. Firstly, in a time-series evaluation, stationarity of the data should be evaluated. All variables are assumed to be stationary in a standard regression analysis. As previously stated, nonstationarity in general causes erroneous regression. The ARDL approach, for example, is not applicable to any integrated variable of order 2. NG-Perron unit root, as shown in Table1, confirms the level of stationarity, and the results show that the ARDL is suitable for analysis.Table 1
NG-Perron unit root test.
VariableLevel1st varianceMZaMZTMZBMPTMZaMZTMZBMPTLogTC0.95760.82450.828651.6429−12.8543∗∗−2.58470.17421.8995LogICT0.11570.06350.674328.8755−18.6548∗−2.87650.15671.7155LogGDP0.87430.81450.8423−19.0764−13.5932∗−2.58770.20761.8976LogGLOB−2.3467−1.34770.4256−21.5438−3.2467∗∗∗0.20760.20652.1578Note: “∗,” “∗∗,” and “∗∗∗” show the levels of significance.Because the standard unit root test fails to detect structural fractures, the Zivot-Andrews (ZA) test is appropriate for research. The results of the structural break test are shown. The outcomes revealed that at level the series is not stationary. The series, however, became stationary when the first difference was taken. Table2 indicates the statistical analysis of the yearly data; findings are generated by the ZA test. Here, the variations can be seen through variables and probability results.Table 2
Outcomes of Zivot-Andrews (ZA) test.
VariablesAt levelAt variancet-statisticsProbabilityYearst-statisticsProbabilityYearsLogTC−3.5677∗∗0.02452010−5.8743∗0.07542011LogICT−1.945∗∗∗0.07452012−7.5663∗0.00032013LogGDP−3.8765∗0.00732015−7.5663∗∗∗0.06432016LogGLOB−2.754∗∗∗0.05432018−5.764∗0.00562017Note: “∗,” “∗∗,” and “∗∗∗” represent the elimination of the null hypothesis at 1%, 5%, and 10%, respectively.Following that, an alternate method known as bound testing is developed, which is based on an autoregressive distributed lag model. It is not necessary for the variables to be integrated in the same sequence. Furthermore, as compared to Johansen cointegration, which requires a high sample size, it is deemed a more appropriate method when the sample size is small. Because it is based on a single equation, it is simple to implement and interpret.The bond testing is performed for analysis, a suitable length of the lags is selected, and the nextF-statistics are checked to see the long-run behavior of variables. The bond testing approach is recommended by the first order of integration to monitor the cointegration. The following table shows the outcomes of the bond analysis and several other diagnostic methods for the model, the results of which explain that the F-statistics are larger as compared to the upper bond of the 1%, 5%, and 10% levels of significance, which results in rejecting the null hypothesis. Also, the results assure that the variables are cointegrated at the long-run relationship among trade credit and other variables.Now, the discussion is on the most significant portion of the research, that is, the analysis of the results of long-run estimation. To estimate the long and short runs, the autoregressive distributed lag (ARDL) model is used. The outcomes of the long run and short run are estimated in the table below. However, the most significant parameter in Table3 is the decision column. The logistic diagnostic methods using F-value and Lag order indicate that the conclusion is constructive or destructive. The statistical values are represented involving trade infrastructure.Table 3
Analysis for bound.
StandardBound testingInvestigative checksFLagsConclusionARCHLMRamseyLogTC =f(LogICT, LogGDP, LogGLOB)5.2367∗1, 0, 0, 0Definite2.4332 [0.120]0.4278 [0.649]0.4378 [0.517]Note: “∗” shows the level at 1%.As the consequences mentioned in Table4, the figure of the coefficient is −0.0264 which suggests a negatively strong association with trade credit. The negative association is because of the small size of the market that deals globally with trade credit and thus there are decreased exports. ICT is always an opportunity, especially for the business of the developing countries, so that the technology brings rigorous actions for imports and exports policy by the country. Trade credit is globally recognized and is very effective for business investors to deal internationally around the globe. The results of economic growth, as stated in Table 4, have a considerable beneficial impact on trade credit as a 1% rise in growth brings trade credit to increase by 0.0543%. Trade credit helps to endorse the utilization of new and innovative products, services, and technology and thereby increases economic growth in the country. The positive association yields that trade credit brings economic growth to the country. Pakistan, as a country with a developing economy, has more focus on economic growth which is the backbone of the country.Table 4
Projected outcomes of long versus short trends.
VariableCoffs.Std.t-valuesProb.Higher dynamicsLogICT−0.0264∗∗∗0.0045−4.87540.0145LogGDP0.0543∗∗∗0.02452.54320.0343LogGLOB0.0365∗∗∗0.35782.65430.0754Imitation0.1049∗∗0.02454.46680.0245Stable0.0157∗0.005523.76540.0054Lower dynamicsLogICT0.0654∗0.07657.86540.0054LogGDP−0.1065∗0.0134−8.24560.0035LogGLOB3.0975∗0.43267.57880.0045Imitation0.0765∗∗0.01345.46770.0116CoinEq(−1)−2.4327∗0.2568−8.48760.0036Analytical analysisR-square0.9945Adj R-square0.9954F-value897.6534Probability. (F)0.0000Durbin-Watson2.0876χ2-Ramsey2.0032χ2-ARCH1.4256χ2-LM1.2589Note: “∗,” “∗∗,”, and “∗∗∗” indicate the significance at 1%, 5%, and 10%, respectively.So, the government of Pakistan should take precautionary measures and develop policies to check and maintain the economic stability by industrial sector, innovative products, and utilization of advanced instruments, machinery, and updated technology; this has an immediate impact on the monetary benefits of a country. These policies are helpful for the economy and these resources are utilized in the long term.The statistics of the coefficient of resources available globally are 0.0365, indicating a 1% rise in the figures of global means, and spread the practice of trade credit by 0.0365%. The evaluation of the study recommends that globalization is the main provider to the attraction of foreign investment in the country. The trade credit could be recognized as if the management or the officials will take measures concerning the proper utilization of technology, as also presented in Table5.Table 5
Results of analysis.
The Wald statistics for short-run causalityLong direction (t-statistics) ecmt−1ΔLogTCΔLogGLOBΔLogGDPΔLogNRLogic—−0.0075 [0.932]0.3276 [0.750]0.1245 [0.750]0.0125 [0.814]LogICT0.1863 [0.832]—3.7543∗ [0.005]3.7654 [0.932]−0.3374∗ [0.000]LogGDP0.7646 [0.453]3.1378∗ [0.032]—1.8464∗∗∗ [0.072]−0.5875∗ [0.002]LogGLOB0.1854 [0.863]−1.7554∗∗∗ [0.086]1.6543 [0.115]—−0.0864 [0.344]Note: the probability values are shown in parenthesis. “∗” shows the degree of elimination at 1%. “∗∗” shows the degree of elimination at 5%. “∗∗∗” shows the degree of elimination at 10%.The use of assets has a tremendous effect on credit because Pakistan is bestowed with many natural resources. These resources are abundantly available in the country. However, the economy of Pakistan can flourish when manufacturing units are abundant to utilize these resources and deal internationally to expand their trades. Also, the policy mechanism of the country is not so effective for decision-makers and a poor mechanism to handle these natural resources destroys them. These problems can be minimized if the government of Pakistan takes measures to deal with and utilize these resources and trade credit is suitable for this investment. The government takes initiatives, and the foreign investors can deal with trade credit to mutually benefit from the technological progress in the country.The study also emphasizes autocorrelation and heteroscedasticity by applying analytical methods like ARCH, LM, and Ramsey tests. The results show that there is no autocorrelation or heteroscedasticity, as seen in Table4. The ARDL approach is used to track long-term outcomes, although causation direction is not clear. The interconnection analysis is used to explore the interconnected relationship.As shown in Table5, the VECM Granger test is used to prove that the variables have a long-term relationship.Table5 explains the results which show that the causal long-run relationship between trade credit and globalization is established. Bidirectional causality is found between these two variables. The economic growth is also observed to be bidirectional. VECM test confirms that there exists a long-run relationship among the selected variables, as also shown in the above table.


## 5. Blockchain Technology as a Case Study in Trade Credit

Blockchain is an electronic shared, immutable ledger, which is distributed in a business network that facilitates the process of tracking and recording transactions and assets. Blockchain technology records and tracks different information of trade credit for SMEs. It includes variables like amount, time, and data and the unique digital signature for security. One of the distinct features of the Blockchain technology is its reliability. The structure is maintained concretely by allocating every block a unique number. The number of blocks is allocated unique numbers representing a series. Then, the blocks are connected in such a way that every block is connected to the next block. The data is further secure where it requires the hash sum of the entire connected blocks to maintain its security. Other unique features of Blockchain sustainability and integrity are decentralization, cryptography, and consensus, which were least identified previously, especially in obsolete systems. The ICT is applicable in the form of Blockchain so that the financial transactions can be operational flawlessly and effectively. For financial concerns, each Blockchain contains the dealings such that every new transaction is saved to the ledger of every participant. All the trade credit information is saved in a distributed database which is managed by multiple participants called Distributed Ledger Technology (DLT). DLT is a database that is accessible by multiple users from multiple locations, so the data are managed on various memory locations using identical copy; the users can access it using various platforms.(i)
Smart contract concept by Blockchain in trade credit: Blockchain enables the concept of smart contract in trade credit. Smart contracts are decentralized contracts with the consensus of trading parities having transparent immutable proof algorithmic exclusions. A smart contract is a series of digital documents and agreements which includes transactions detail and term and conditions promised by trading parties. The immutable nature program protocol of smart contract allows the execution process and automation of contracts terms and conditions. The smart contract does not need the third parties, for example, banks, to play an intermediary role and parties can directly collaborate to minimize the cost and time. The smart contract can drastically reduce the cost of resources required, documentation, information gathering, and processing, negotiating, and drafting of contracts, monitoring, transparency, reliable communication, secure payment, and digital cryptographic agreement signatures.Smart contracts advance the increase in the trust up to a higher level by providing a secured distributed database, enhance transparency in trade transactions, reduce the risks and frauds, increase data reliability, and facilitate the exchange of payments and automatic executions without human mistakes or intermediary involvement. The information is highly secure in leisure systems. This is one of the important requirements for online systems. The privacy preservation is solely under the decision of the organization; the components which indicate the progress or revenue generations can be displayed while keeping the company credentials hidden. The system is maintained in a distributed manner; leisure system works on privilege-based authentication; therefore, it is not possible to easily drain the protected information. Thus, Blockchain provides smart contracts technology system that will reshape the traditional trade credit, very appropriate for small-to-large international trade activities.


### 5.1. Traditional Trade-Credit Limitations: A Space for Blockchain Technology

Traditional manual trade credit has some limitations as follows:(i)
Manual process involves a lot of paper documentation by the issuing banks (the importer and exporter's banks) to process the contracts, exchange the documents, analyze discrepancies, and so forth, which is subjected to human error and takes time and cost.(ii)
Invoice factoring is requested by exporters who present their payment invoices to several banks; thus, it increased the risk profile.(iii)
delayed timeline and delayed payment, the paper-based traditional trade credit involves multiple financial procedures and intermediaries to execute the agreements, contracts, and payment. Several days are taken to issue, confirm, and execute payments.(iv)
Multiple communication channels that exposed banks and business parties to miscommunication and fraud are involved.(v)
Duplication in documentation can result in mistakes or processing the same transaction twice or more.(vi)
Tampering and less security of the financial record as the documentation can be used by unauthorized access. As a result, a record could be illegally duplicated, updated, manipulated, or falsified.(vii)
Illegal financial record tempering is of a high frequency.


### 5.2. Blockchain Reshaping the Traditional Trade Credit

Blockchain technology has some potential advantages that could help trade credit in many ways:(i)
From paper to bytes: Banks are trying to use technology to digitalize the documentary trade-credit process, but, still, most of the transactions are paper-based but this time with a better and advanced technology of Blockchain and smart contracts promising to enable easier, faster, efficient, and secure digital transactions and digital documentation.(ii)
Efficiency: Smart contracts make the trade credit more efficient by providing fast, digitalized information with no intermediary platform and extra communication channels. The smart systems are efficient for data processing. The other considerable factor involves storage speed. Smart contracts speed the trade finance cycle. Transactions that took months can be reduced to days and days can be reduced to hours. As the terms of the contract are digitally signed, the Blockchain in real-time status is updated, which reduces the time as well as the headcounts which are required to monitor the delivery.(iii)
Traceability: Blockchain facilitates the importers and exporters that can easily trace the information, transactions, goods, and assets. The Blockchain title specifies transparency into the location as well as the ownership of the goods. All the execution processes are traceable between the trading parties.(iv)
Transparency: The distributed ledger ensures the transparency of all information and transactions to improve the trust among the trading parties. Blockchain invoices provide a real-time and transparent view with time stamped.(v)
This helps to reduce tempering risk and offers more advanced option for financing trade.(vi)
Auditability: Blockchain ensures high auditability by storing record sequentially and indefinitely avoiding extra activities for the auditing. A clear and better verification of transactions, goods, and assets is provided with a reduction of compliance costs. This minimizes fraudulent activities.(vii)
Security: Each transaction has a unique identity and independently cryptographic verification. Encryption and programmed cryptography protect the transmission of data between different trading companies and thus highly privatize the data to ensure their authenticity.(viii)
Documents real-time review: Financial documents which are linked and accessible via Blockchain are properly reviewed.(ix)
Automated settlement of accounts and reduction of transaction fees: All those contract terms which are executed through the smart contract eliminate the requirement for financial banks or institutions to charge additional transaction fees.(x)
Autonomy is ensured by Blockchain, as smart contracts remove the intermediate parties or any reliance on banks.(xi)
Costs and fees are reduced, by improved efficiency to save time and removing intermediate third parties to save the extra cost.(xii)
Bogus transactions, fraud, accidental financial transference, and online credit threats can be avoided.(xiii)
E-commerce transactions are highly applicable particularly during the COVID-19 pandemic; exponential rise of financial flows can be protected by the end to the endpoint of the security system, which is ensured by Blockchain.


## 5.1. Traditional Trade-Credit Limitations: A Space for Blockchain Technology

Traditional manual trade credit has some limitations as follows:(i)
Manual process involves a lot of paper documentation by the issuing banks (the importer and exporter's banks) to process the contracts, exchange the documents, analyze discrepancies, and so forth, which is subjected to human error and takes time and cost.(ii)
Invoice factoring is requested by exporters who present their payment invoices to several banks; thus, it increased the risk profile.(iii)
delayed timeline and delayed payment, the paper-based traditional trade credit involves multiple financial procedures and intermediaries to execute the agreements, contracts, and payment. Several days are taken to issue, confirm, and execute payments.(iv)
Multiple communication channels that exposed banks and business parties to miscommunication and fraud are involved.(v)
Duplication in documentation can result in mistakes or processing the same transaction twice or more.(vi)
Tampering and less security of the financial record as the documentation can be used by unauthorized access. As a result, a record could be illegally duplicated, updated, manipulated, or falsified.(vii)
Illegal financial record tempering is of a high frequency.


## 5.2. Blockchain Reshaping the Traditional Trade Credit

Blockchain technology has some potential advantages that could help trade credit in many ways:(i)
From paper to bytes: Banks are trying to use technology to digitalize the documentary trade-credit process, but, still, most of the transactions are paper-based but this time with a better and advanced technology of Blockchain and smart contracts promising to enable easier, faster, efficient, and secure digital transactions and digital documentation.(ii)
Efficiency: Smart contracts make the trade credit more efficient by providing fast, digitalized information with no intermediary platform and extra communication channels. The smart systems are efficient for data processing. The other considerable factor involves storage speed. Smart contracts speed the trade finance cycle. Transactions that took months can be reduced to days and days can be reduced to hours. As the terms of the contract are digitally signed, the Blockchain in real-time status is updated, which reduces the time as well as the headcounts which are required to monitor the delivery.(iii)
Traceability: Blockchain facilitates the importers and exporters that can easily trace the information, transactions, goods, and assets. The Blockchain title specifies transparency into the location as well as the ownership of the goods. All the execution processes are traceable between the trading parties.(iv)
Transparency: The distributed ledger ensures the transparency of all information and transactions to improve the trust among the trading parties. Blockchain invoices provide a real-time and transparent view with time stamped.(v)
This helps to reduce tempering risk and offers more advanced option for financing trade.(vi)
Auditability: Blockchain ensures high auditability by storing record sequentially and indefinitely avoiding extra activities for the auditing. A clear and better verification of transactions, goods, and assets is provided with a reduction of compliance costs. This minimizes fraudulent activities.(vii)
Security: Each transaction has a unique identity and independently cryptographic verification. Encryption and programmed cryptography protect the transmission of data between different trading companies and thus highly privatize the data to ensure their authenticity.(viii)
Documents real-time review: Financial documents which are linked and accessible via Blockchain are properly reviewed.(ix)
Automated settlement of accounts and reduction of transaction fees: All those contract terms which are executed through the smart contract eliminate the requirement for financial banks or institutions to charge additional transaction fees.(x)
Autonomy is ensured by Blockchain, as smart contracts remove the intermediate parties or any reliance on banks.(xi)
Costs and fees are reduced, by improved efficiency to save time and removing intermediate third parties to save the extra cost.(xii)
Bogus transactions, fraud, accidental financial transference, and online credit threats can be avoided.(xiii)
E-commerce transactions are highly applicable particularly during the COVID-19 pandemic; exponential rise of financial flows can be protected by the end to the endpoint of the security system, which is ensured by Blockchain.


## 6. A Blockchain-Based Complex Data Processing for Trade Credit: A Framework Design

Different SMEs are actively trying to participate in economic progress. The bottlenecks mentioned in the above section are critically important. The association of these SMEs can be technically connected using the Blockchain method. The Blockchain model is represented in Figure1. It indicates that various SMEs can be connected. It means the financial block of components which either participate in financial completion or are involved in the initialization of financial transactions, particularly for trade credits; they are connected in the block-by-block architecture.Figure 1
Trade credit consolidation through Blockchain model.Financial Blockchain enables the transaction recording on the distributed ledger for multiple users from multiple locations. This can connect the SMEs and financial firms in a way where the transactions are maintained with associations. The data is stored in the form of blocks and every block has encrypted time-stamped transactions. These blocks are chained or connected chronologically, thereby creating a long chain or Blockchain technology.DLT reshapes the traditional trade credit and digital documentation flow transparently among banks, imports and exports, trading companies, and other business communities. All the transactions are secured by unique cryptographic signatures with a timestamp that is immutably recorded on the blockchain. Business partners with the right permission can access the shared information for complete transparency, which helps to tackle the fraud issue and increase trust.


## 7. Conclusion

The investment in trade credit is an important aspect that becomes an important part of the balance sheet of the firms. The trade credit exists as the firm allows the buyer firms to delay payment of the amount and relaxes the policies for them. Therefore, customer firms take advantage of these investments and increase their profitability. Thus, this study is an important contribution towards trade credit, ICT, and globalization, which bring economic growth and stability to the country.This research is an attempt to support Pakistan to maintain the trade credit relationship with ICT, globalization, and economic growth for 2000–2019. ARDL cointegration methodology is applicable to monitor the long-run relationship between the variables. Also, the VECM Granger causality test is applied to conclude both the long-run and short-run directions of the applied variables. Lastly, several other diagnostic methods are also applied, including ARCH, LM, and Ramsey tests. Globalization has an encouraging influence on trade as it expands with globalization and the economy is also flourishing. ICT has also a positive influence on trade credit if these technological resources are properly utilized.Managing trade credit is an essential perspective for small industries. Efficient and productive trade credit enhances the productivity and efficiency of the firms. The trade credit policy implementation is of high importance for profitability. Offering trade credit is a significant factor for the life of the small business in particular, where trade credit is above the long-term assets of the company. Trade credit is also considered to be an important element of the management policy of the firms. Therefore, it alleviates the information asymmetry regarding the quality of the goods before paying for the product. Trade credit is for commercial purposes to increase the sales of the goods and to increase the worth of the business.The results of the study also recommend that the government of Pakistan should be aware of ICT, globalization, and particularly small business units which have a direct effect on the exports of the country. Also, formal quality should be certified by reforms of policies that will enhance globalization and bring trade to the country. Improved legal systems, control over corruption, quality of information transferred by officials, and supervision of the financial and nonfinancial institutions could also support the country to improve globalization and trade credit in the country.Therefore, this study also required a thorough, complete rearrangement of policies by the officials of the country, built on the development and executions of social, economic, ethical, and political actions. No doubt, this century is one of technology. Therefore, ICT has an encouraging influence on trade credit because mobile and Internet resources are the biggest asset for the country and policymakers must spotlight the appropriate utilization of technologies as these are not utilized optimally.The exports of natural coal, gas, salt, and other minerals are an edge to the trade credit investors. Economic growth is also positive and significant to trade credit. As investment in research and development is required for any nation, which brings economic growth and stability. Pakistan is facing many sorts of challenges in development and growth. The shortage of electricity is because of the energy deficiency faced by the country. The deficiency of electric supply is an outcome of mismanagement and mechanism and control from the government. The state should concentrate on and implement policies on this vital scenario and must approve some strategies which restore the available resources of the country. Having an abundance of energy resources is always an advantage for poverty alleviation and enhancing human development. The productive use of these natural resources brings the quality of life. The legitimate usage of innovation diminishes the advancement of wellbeing and training areas to prosper and brings the quality of services at the doorsteps.Policymakers should also concentrate on these Internet usages when state security issues are involved. Global trade along with the rest of the world opens a new horizon for growth and innovations. An increase in the international business hub leads to economic growth and stability. The government of Pakistan should also take measures to facilitate and benefit from the trade credit, which encourages the entry of foreign investors to deal with the local markets and increases the efficiency of the business hub. Overall, results show that trade credit is essential, and incorporating routine credit management for a firm’s profitability is an essential factor for technology. Therefore, trade credit is an important strategy for financials and planning management to encourage the business. Also, the effects on trade credit help the investors to forecast the economic condition of the country. This work essentially clears the varying results in the literature concerning the association between ICT, globalization, the growth of the economy, and trade credit.



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*Source: 9621342-2022-02-27.xml*