Bitcoinization in El Salvador is in full swing. The next item on the orange agenda is to provide small and micro businesses with low-interest loans backed by Bitcoin (BTC).
Although the details of the BTC loan are yet to be revealed, Monica Tahir, Chief Technology and Economic Affairs Officer of the El Salvador government, hosted a live audio clip on Facebook titled “Bitcoin Loans at Low Interest Rates.”
Government advisor Monica Taher told Cointelegraph:
Small bitcoin loans will give access to digital money to those without a bank and help them build a credit history. El Salvador’s economy will be boosted by boosting small businesses.”
Paul Steiner, President of CONAMYPE (The National Institute for Small and Micro Enterprises), said the loan implementation will work with the El Chivo government portfolio.
Small and micro businesses dominate the business landscape in El Salvador, and Bitcoin-backed loans present an opportunity to set things right. Steiner explained:
El Salvador has about 1.2 million companies in the country. About 66% of the enterprises are small or “subsistence farming”. More than 90% of small businesses are self-financed through informal loans or loans.”
He gave the example that a $100 loan obtained by a small business is usually given full repayment within 20 days, and the interest rate can be as high as $15 per day. In some cases, the annual interest rate on these loans exceeds 10,000%.
Ultimately, the interest rate on bitcoin-backed loans will be lower than the interest rate of informal lenders, sharks, and banks.
Andrea Maria Gomez, head of the Acumen Project, a lending protocol for decentralized finance (DeFi), shared that “some crypto enthusiasts in El Salvador are already using crypto solutions like DeFi because they offer ease of use and a higher interest rate than banks.”
Related: El Salvador’s Bitcoin Wallet Has 4 Million Users Partnered by Netki
Also participating in the discussion was Alessandro Cesare, Social Director at Canadian Bitcoin firm Ledn. Ledn recently launched a BTC-backed home loan. He wondered if El Salvador could copy the company’s example and whether bitcoin could be seen as collateral for future mortgages.
Steiner was open to discussion and optimistic about the future of Bitcoin. However, his priority is to improve the business environment for SMEs. When asked in a conversation about road or other home loans, Taher reiterated that the loan product would only be available to small and micro businesses at this time: “We’ll discuss mortgages later.”
Steiner summed up his vision by talking about the challenges small businesses face in El Salvador:
“Businesses need an entry point for funding: Bitcoin is such an opportunity.”
