President Nayib Bukele of El Salvador is pushing the limit by making Bitcoin legal tender in the real world. The government of El Salvador is working on a Bitcoin-backed loan product for micro and small businesses across the country.
As a result, in the near future, tiny and micro-businesses will be able to qualify for low-interest loans secured by Bitcoin (BTC).
Monica Taher, an advisor for the government of El Salvador, stated during a recent Facebook Live Audio discussion titled “Bitcoin loans with lower interest rates” that the next step in El Salvador’s Bitcoin agenda was to use the benchmark cryptocurrency to provide low-interest loans to small and micro-businesses.
Mónica Taher, a government advisor, said:
“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.”
According to Paul Steiner, president of CONAMYPE (the national institute for small and microbusinesses), the government-created El Chivo wallet will be used to execute loans. El Chivo, the government of El Salvador’s official Bitcoin and USD wallet, has seen a surge in usage.
It has gathered more than 60% of the country’s overall population in less than four months after its beginning. It is already being used by 4 million people out of a population of 6.5 million (including those under the age of 18 who are not authorized to use the wallet).
Small and microbusinesses dominate El Salvador’s commercial scene, and Bitcoin-backed loans offer a chance to change that. “El Salvador has over 1.2 million firms,” Steiner explained. “Micro-companies or subsistence’ firms account for roughly 66% of the total. Over 90% of micro-businesses rely on informal loans or loan sharks for funding.”
For a $100 loan with a 20-day repayment period, loan sharks and informal lenders could charge up to $15 per day in interest, according to Steiner. Bitcoin-backed low-interest loans, which would serve as “an entry point for funding,” would significantly enhance the lives of these businesses.