As a form for The Bitcoinization of El Salvador, the next point on the country's agenda is in providing low-interest loans backed by Bitcoin (BTC) to small and micro businesses.
While details of btc loans are currently not disclosed, Mónica Taher, director of international technology and economic affairs for the Government of El Salvador, held a Facebook Live audio room yesterday, with the title "Bitcoin loans at lower interest rates".
Government adviser Mónica Taher said:
"Small Bitcoin loans will provide access to digital money for the unbanked while helping them create a credit history. El Salvador's economy will strengthen by empowering its small businesses."
Paul Steiner, president of CONAMYPE—a national institute for small and micro-businesses, shared that the implementation of the loan would work with the government-created El Chivo purse.
El Salvador's business landscape is dominated by small and micro businesses, and Bitcoin-backed loans are an opportunity to recover the situation. Steiner illustrates:
"El Salvador has about 1.2 million businesses in the country. About 66% are micro-businesses or 'subsistence' businesses. More than 90% of micro-businesses are self-funded through informal loans or loan sharks."
He cited the example that a $100 loan taken out by a micro-business would typically come with full repayment terms within 20 days, while interest rates could reach $15 a day. In some cases, the annual interest rate for such loans "exceeds 10,000%."
Ultimately, the interest rates provided by BTC-backed loans will be lower than informal lenders, loan sharks, and banks.
Andrea María Gómez, a project manager for Acumen– a decentralized financial lending protocol (DeFi)—shared that "some crypto enthusiasts in El Salvador are already using crypto solutions like DeFi because they offer ease of use and higher interest rates than banks."
Alessandro Cecere, community manager for Ledn— a Canadian Bitcoin company — also participated in the discussions. Ledn recently launched a BTC-backed mortgage. He asked if El Salvador might copy the company's example and whether Bitcoin could be considered a guarantee for future mortgages.
Steiner is open to discussion and optimistic about the future of Bitcoin. However, the priority is to improve the business environment for small and medium-sized businesses. When asked on a chatbox about loans for other avenues or housing, Taher reiterated that the loan product would only be available to small and micro businesses for now:
"We'll discuss mortgages later."
Steiner summed up the vision when referring to the challenges facing micro-businesses in El Salvador:
"Businesses need an entry point for financing: Bitcoin is that opportunity."