Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
The Salvadoran government is looking to create a Bitcoin-backed loan product for micro and small businesses across the country.
Itâs full steam ahead for El Salvadorâs Bitcoinization. The next point on the orange agenda is in providing low-interest loans backed by Bitcoin (BTC) to small and micro-businesses.
While the details of the BTC loans are currently undisclosed, MĂłnica Taher, technological and economic international affairs director for the government of El Salvador, held a Facebook Live audio room yesterday, called âBitcoin loans with lower interest rates.â
The government advisor, MĂłnica Taher told Cointelegraph:
âThe Bitcoin small loans will provide access to digital money for the unbanked while helping them create a credit history. El Salvadorâs economy will strengthen by empowering its small businesses.âÂ
Paul Steiner, president of CONAMYPE (the national institute for small and micro-businesses), shared that the implementation of loans would work with the government-created El Chivo wallet.
El Salvadorâs business landscape is dominated by small and micro-businesses, and Bitcoin-backed loans are an opportunity to remediate the situation. Steiner illustrated:
âEl Salvador has roughly 1.2 million businesses in the country. Roughly 66% are micro-businesses or âsubsistenceâ businesses. Over 90% of micro-businesses are self-funded via informal loans or loan sharks.â
He cited the example that a $100 loan taken out by a micro-business will typically come with terms of full repayment in 20 days, while the interest rate could be up to $15 a day. In some cases, the annual interest rate for such loans âexceeds 10,000%.âÂ
Ultimately, the interest rate provided by BTC-backed loans would be lower than that of informal lenders, loan sharks and banks.
Andrea MarĂa GĂłmez, a project manager for Acumen â a decentralized finance (DeFi) lending protocol â shared that âsome crypto enthusiasts in El Salvador are already using crypto solutions such as DeFi as they offer an ease of use and a higher interest rate than banks.â
Related: El Salvadorâs Bitcoin wallet onboards 4M users with Netki partnership
Alessandro Cecere, community manager for Ledn â a Canadian Bitcoin company â also participated in the discussion. Ledn recently launched BTC-backed mortgages. He asked whether El Salvador might copy the companyâs example and whether Bitcoin might be considered as collateral for mortgages in the future.
Steiner was open to the discussion and optimistic about the future of Bitcoin. However, his priority is to improve the business environment for small and mid-size enterprises. When prompted in the chatbox about loans for other avenues or housing, Taher reiterated that the loan product would only be available to small and micro businesses for the moment: âWe will discuss mortgages later.â
Steiner summed up the vision when referring to the challenges that micro-businesses face in El Salvador:
âBusinesses need an entry point for financing: Bitcoin is that opportunity.â
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.