El Salvador is going even more bullish on Bitcoin. With Bitcoin already being accepted as legal tender in the country, the government is exploring more ways where Bitcoin can be implemented into the financial system.
The advisor to the Salvadoran government, Monica Taher, was speaking in a Facebook Live Audio session, with the discussion revolving around the topic, “Bitcoin loans with lower interest rates.”
Bitcoin loans for the people of El Salvador
Taher did not disclose any in-depth details about these loans. Paul Steiner, the president of CONAMYPE, El Salvador’s institute for small and micro businesses, noted that these Bitcoin loans would be integrated within the El Chivo wallet created by the Salvadoran government.
The economy of El Salvador is mainly comprised of small and micro-businesses. By supporting Bitcoin-backed loans, these businesses have a chance to grow and aid the economy.
“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,” Steiner said.
Steiner noted that these small and micro businesses usually take loans that charge high interest that stifle their growth. He added that some of these loans charge interests that “exceed 10,000%.”
The interest rates that will be charged by the loans backed by Bitcoin will be lower than the interest rate charged by informal lending institutions, banks and loan sharks. This could aid in the growth of these small businesses.
Move supported by other crypto players
Taher’s Facebook Live was joined by other players in the crypto market. Andrea Martia Gomez, a project manager for the Acumen DeFi lending platform, stated, “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, a community manager for Ledn, was also part of the discussions, asking if El Salvador would copy its Bitcoin model and if Bitcoin could be used to secure messages in the future. Ledn is a Bitcoin firm in Canada that recently launched mortgage options backed by Bitcoin.
In the discussion, Taher noted that the Bitcoin loans would be only available to small and micro-businesses. On the issue of BTC-backed mortgages, Taher said, “we will discuss mortgages later.”
Steiner also noted that his priority was to boost the business ecosystem for SMEs in El Salvador. He concluded that Bitcoin was the “entry point for financing” needed by SMEs.
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