The Salvadoran government is considering Bitcoin-backed loans for small and medium-sized enterprises. The adoption of Bitcoin in El Salvador is moving forward rapidly. As a result, small and micro-businesses will soon be able to apply for low-interest loans secured by Bitcoin (BTC).
Relating to this topic, the specifics of this new progress are still under wraps. However, El Salvadoran government adviser, Mónica Taher, was open and honest in a Facebook Live Audio the day before. The main topic of the conversation was the option of Bitcoin loans with lower interest rates.
On the other hand, the President of Conamype, a national institute for small and micro-businesses, revealed significant insights about applying for loans. He added that the implementation of loans is compatible with the El Chivo wallet created by the government. Currently, small and micro-sized enterprises (SMEs) dominate El Salvador’s commercial scene. In regards, Bitcoin-backed loans provide the potential to solve this condition.
Steiner notes that, in El Salvador, there are around 1.2 million enterprises. According to a recent survey, 66% of firms fall into micro-businesses. Following more details, more than 90% of micro-businesses rely on informal loans or loan sharks to fund their operations.
To demonstrate, Steiner dives into a more detailed case. He notes the interest rate on a $100 loan to a microbusiness might be as high as $15 each day. Accordingly, the loan usually is due in 20 days. As a result, the yearly percentage rate on these loans exceeds 10,000 percent in certain situations. In the final analysis, loans backed by BTC will have lower interest rates than those offered by informal lenders, loan sharks, and banks.
Why Would Bitcoin-Secured Loans Be a Great Solution?
When it comes to DeFi’s simplicity of use and greater interest rates than banks, people are taking advantage of this quality. In light of this, the project manager Andrea Martia Gomez raises attention to crypto admirers. She notes that crypto enthusiasts in El Salvador are already embracing crypto solutions such as DeFi.
Furthermore, one of Ledn’s Community Managers, Alessandro Cecere, was present in the discussion about BTC loans. During this conversation, Ledn introduced mortgages guaranteed by BTC. However, his question was if El Salvador may follow their lead and use Bitcoin as security for mortgages in the future.
According to the report, Steiner was receptive to the debate and hopeful about the future of Bitcoin and the cryptocurrency market. His first aim is to enhance the business environment for small and medium-sized enterprises (SMEs). Among other things, basic questions such as whether the loan product will be accessible for other routes like homes came up. In response to this, Mónica Taher emphasized that they are thinking of offering this exclusively to small and micro-enterprises for the time being. However, she stated that they will also discuss the mortgages later.
Indicating the challenges that micro-businesses face in El Salvador, Steiner came up with a conclusion. He concludes that businesses need a point of entry into the finance market, and Bitcoin provides that chance.