El Salvador explores low-interest loans backed by Bitcoin
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 not disclosed, Mónica Taher, an advisor for the government of El Salvador, was straight-talking in a Facebook Live Audio held yesterday. The discussion was called “Bitcoin loans with lower interest rates.”
Paul Steiner the 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:
He cites 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 Martia Gomez, a project manager for Acumen, a 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.”
Related: El Salvador’s Bitcoin wallet onboards 4M users with Netki partnership
Alessandro Cecere, Community Manager for Ledn, a Canadian Bitcoin company also participated in the discussion. Ledn recently launched BTC-backed mortgages. He asked if El Salvador might copy their example and if Bitcoin might be considered as collateral
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