El Salvador To Provide Crypto-Backed Loans For Small And Medium-Sized Businesses

The El Salvadorian government is pushing to make Bitcoin a legal tender while it plans to provide low-interest crypto-backed loans to SMEs and entrepreneurs.

Bishal Kumar Chanda5 min read
El Salvador To Provide Crypto-Backed Loans For Small And Medium-Sized Businesses

The government of El Salvador is pushing the cause of making Bitcoin a legal tender worldwide. It plans on offering small and medium-sized businesses a total of $10 million as low-interest crypto-based loans in Q1 of 2022. The El Salvadorian government has partnered with a Solana-based borrowing and lending platform, Acumen. The platform will be providing US dollars as funding to El Salvador’s National Commission for Micro and Small Enterprises (CONAMYPE).

El Salvadorian citizens can access Acumen loans at an annual interest rate as low as 6% to 10%. According to local statistics, about 86% of El Salvadorian companies operate in informal industries and can not take loans from banks. Almost all of them depend on loans from unregistered lenders charging an interest rate of 20% to 25% per month. For solving the issue of such loan sharks and helping the small and micro-businesses grow, the government has been in contact with Acumen since October 2021. Acumen is not the only platform with which the El Salvadorian government is in talks. The estimated agreements can total more than $200 million, which would provide funds for El Salvador’s SMEs.

Although the government and Acumen are still discussing the details of their agreement, the money lending process is pretty simple. Acumen will convert cryptocurrencies (mainly Bitcoin) to stablecoins (USDT or USDT) and send US dollars to CONAMYPE. The US dollars will be further distributed by the state-owned bank Banco Hipotecario to SMEs and entrepreneurs. The capital and interests returned by the SMEs to the government will then be returned to Acumen as US dollars.

According to Nayib Bukele, El Salvador’s president, Bitcoin will be embraced as a legal tender by at least two more countries this year. He will soon be meeting with the president of Turkey, Recap Tayyip Erdogan, to discuss his vision for Bitcoins further. Turkey has been suffering greatly from inflation lately, and to overcome it, the country seems to be interested in adopting Bitcoin. President Erdogan has recently announced to bring measures that will change Turkey’s present laws on crypto and make way for Bitcoin adaption. With crypto being the favorite currency of the new generation, we might witness more and more countries following in El Salvador’s footsteps.

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