El Salvador wants to give small businesses access to Bitcoin-backed loans

Bitcoin is pushing deeper into the fabric of El Salvador’s economy. The Central American nation is now considering providing low-interest Bitcoin-backed loans to small and micro businesses as one of the next steps of its Bitcoinization. The scheme will cater to the pressing need of small business owners to get fair-priced funding for their enterprises.

El Salvador is considering making Bitcoin-backed loans available to SMEs

During a Facebook Live Audio conversation held recently titled “Bitcoin loans with lower interest rates,” Monica Taher, an advisor for the government of El Salvador, noted that the next point in El Salvador’s Bitcoin agenda was in using the benchmark cryptocurrency to provide low-interest loans for small and micro-businesses.

Details of how the scheme is going to work were not disclosed, but the reason behind the move was explained in depth. According to Paul Steiner, the president of El Salvador’s National Institute for Small and Micro-Businesses (CONAMYPL), there is a pressing need for low-interest loans in the country. He notes that the majority of the country’s business operations were small and micro-scale, and they have been plagued by unfairly high rate loans

El Salvador has roughly 1.2 million businesses in the country, Roughly 66% are micro-businesses or “subsistence” businesses. Over 90% of micro-businesses are self-funded via informal loans or loan sharks,  he said.

As a case in point, Steiner cites that it was typical for loan sharks and informal lenders to charge up to $15 as daily interest for a $100 loan that is to be paid back within 20 days. The Bitcoin-backed low-interest loans would greatly improve the lives of these business persons, serving as “an entry point for financing.” The scheme will also work through El Salvador’s official Bitcoin wallet, the Chivo wallet.

El Salvador is championing even more Bitcoin adoption globally

El Salvador’s president Nayib Bukele, who has predicted that at least two more nation-states would adopt Bitcoin as legal tender this year, may be working to see this prediction play out. He recently revealed that he would be meeting with the president of Turkey, Recep Tayyip Erdogan. Turkey has been showing interest in adopting Bitcoin to help the country out of massive current inflation. Erdogan recently revealed that a bill to regulate cryptocurrencies was on its way to the country’s parliament. The bill intends to overhaul the country’s current crypto policy and open the door to Bitcoin adoption.

Similarly, Bukele’s influence has been noted in the plans of Tonga to allow Bitcoin to be used as legal tender. Former Member of Tonga’s Parliament Lord Fusitu’a recently claimed that the kingdom’s Bitcoin bill could soon be passed to make Bitcoin legal tender.

El Salvador does not plan to stop at low-interest Bitcoin-backed loans. During the Facebook audio conversation, the idea of allowing the use of Bitcoin as mortgage collateral was mentioned as well.