El Salvador explores low-interest loans backed by bitcoin
Bitcoinization in El Salvator goes in full fledge. The next point on the agenda is providing low-interest loans backed by bitcoin to small and micro-businesses.
While the details of the BTC loans have not yet been disclosed, Mónica Taher, an adviser for the government of El Salvador, was straight-talking in a Facebook Live Audio held on Wednesday. The discussion was called “Bitcoin loans with lower interest rates.”
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 said:
“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 provided an 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 Martia Gomez, a project manager for Acumen — a decentralized finance 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.”
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.
Source: Cointelegraph.com
