El Salvador To Create Loans Backed By Bitcoin• January 20, 2022 9:30 pm • Comments
The government of El Salvador is looking to provide low interest loans to small and medium sized businesses through the use of bitcoin as collateral.
Currently, the country has around 1.2 million businesses where a majority of them are considered micro-businesses.
By definition, micro-businesses will typically operate with the assistance of informal loans or loan sharks which are not recommended for them to use because interest rates from these type of loans are excessively high.
As a result, any alternative source of loans would be highly favored by these businesses which is where BTC-backed loans may come in handy for these businesses.
— The Floor (@TheMoonCarl) January 20, 2022
“The Bitcoin small 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 (the national institute for small and micro-businesses), shared that the implementation of loans would work with the government-created El Chivo wallet.
Andrea María Gómez, a project manager for Acumen — a decentralized finance (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.”
“Businesses need an entry point for financing: Bitcoin is that opportunity.”
The El Chivo wallet, the official Bitcoin and dollar wallet of the government of El Salvador, is a core component in providing this financing solution to the country at a mass scale.
Four months after it’s first use, almost 60% of the entire country are already using it to get loans which signifies how in demand affordable financial services are within the nation and how crypto was able to provide that.
The country recently held a broadcasted Facebook Live discussion with Mónica Taher, an adviser for the government of El Salvador, on the future of these crypto-backed low interest loans to help introduce and educate the public about them
Questions that were brought up from the live discussion included whether El Salvador will eventually extend these loans to mortgages for other industries like real estate as other countries have already explored these options.
Taher responded that for now, the focus would be mainly on loans for small to medium businesses and that this would be the starting point before discussing anything else.
Developments such as these where an entire nation looks into a bitcoin-backed financing solution further enforces the potential of building a bitcoin-based economy in some place in the world.
Yahoo reports on another example:
Thus developments such as the Bitcoin-backed loans will only further them in their attempt at establishing a Bitcoin-based economy after the announcement of the Bitcoin City.
Announced about 2 months ago, the Bitcoin city powered by geothermal energy from a volcano and financed by Bitcoin-backed bonds was painted as a Bitcoin haven.
The city promises 0% taxes across income, capital gains, property, payroll, municipal and CO2 emissions.
So it becomes apparent that all the steps being taken are to ensure that the king coin becomes the currency of the future.
The country of El Salvador continues to be optimistic about the launch of future crypto-backed financing solutions which will ultimately lower the barrier for the common person to get access to financial solutions which was previously difficult to access under the traditional financial system.
— Bitcoin Magazine (@BitcoinMagazine) January 20, 2022
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