It’s full steam ahead for El Salvador’s 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, Mónica Taher, technological and economic international affairs director for the government of El Salvador, held a Facebook Live audio room yesterday, called “Bitcoin loans with lower interest rates.”
The government advisor, Mónica Taher told Cointelegraph:
“The Bitcoin small loans will provide access to digital money for the unbanked while helping them create a credit history. El Salvador’s economy will strengthen by empowering its small businesses.”
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 Salvador’s business landscape is dominated by small and micro-businesses, and Bitcoin-backed loans are an opportunity to remediate the situation. Steiner illustrated:
“El Salvador has roughly 1.2 million businesses in the country. Roughly 66% are micro-businesses or ‘subsistence’ businesses. Over 90% of micro-businesses are self-funded via informal loans or loan sharks.”
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 “exceeds 10,000%.”
Ultimately, the interest rate provided by BTC-backed loans would be lower than that of informal lenders, loan sharks and banks.
Andrea María Gómez, a project manager for Acumen — a decentralized finance (DeFi) lending protocol — shared that “some 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.”
Alessandro Cecere, community manager for Ledn — a Canadian Bitcoin company — also participated in the discussion. Ledn recently launched BTC-backed mortgages. He asked whether El Salvador might copy the company’s 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: “We will discuss mortgages later.”
Steiner summed up the vision when referring to the challenges that micro-businesses face in El Salvador:
“Businesses need an entry point for financing: Bitcoin is that opportunity.”News Source