In El Salvador, authorities are examining the possibility of providing loans to small and micro businesses backed by Bitcoin, according to Cointelegraph.
Details of the proposed scheme are not known; it was announced by government adviser CONAMYPE Paul Steiner noted that, if implemented, the financial instrument will operate with the government Chivo wallet. He confirmed that small businesses, which dominate the business landscape, face difficulties in obtaining financing.
“There are about 1.2 million business entities in El Salvador. About 66% are micro-enterprises or family farms. More than 90% of them self-finance through shadow lending or loan sharks,” Steiner said.
According to him, such loans are usually issued for 20 days, and the rate can reach 15% per day. In some cases, annual percentage rates reached 10,000%, Steiner noted.
During the discussion, a representative of Ledn, launched in December 2021 mortgage lending backed by Bitcoin, asked whether the country could follow their example. In response to this and other proposals to expand the program, Taher said that at present the credit product is being developed for small and micro businesses. But she added that authorities would revisit the mortgage issue later.
“Businesses need a gateway to financing. Bitcoin is that opportunity,” Steiner said.
On September 7, 2021 came into force the law recognizing Bitcoin as legal tender in El Salvador. The government’s decision was criticised by many, including economists, IMF and even Ethereum founder Vitalik Buterin.
El Salvador has also began mining Bitcoin, using geothermal energy from volcanoes. However, experts expressed skepticism about the economic viability of this method of mining the asset.