The government of El Salvador will offer cryptocurrency-based loans to small businesses. Conamype, the National Commission for Micro and Small Enterprises, will be the link between investors and a decentralized finance protocol called Acumen, which will be able to fund stablecoins. It aims to help retail investors with no credit history in the country.
Small businesses in El Salvador receive cryptocurrency-based loans
Small businesses in El Salvador can get funds to run their businesses with cryptocurrency. The program is aimed at small business owners who do not yet have access to traditional financing instruments. The loans are offered through Conamype, the National Commission for Micro and Small Businesses, which plans to offer these loans to its registered members.
The announcement was made by Paul Steiner, President of Conamype, and Mónica Taher, responsible for Tech & Economic International Affairs, during a Facebook stream on January 19th. The organization will fund these companies with Acumen, a $10 million decentralized funding protocol based on Solana. The details of the deal are still being worked out, but volatility is said to be minimized by having Acumen make the loans in dollar-pegged tokens like USDT and USDC and the borrowers repay the loans in dollars.
Current state of the credit market
To underscore the importance of these loans given what small and medium-sized businesses in the country face in order to obtain financing, Steiner explained that most small businesses are still not part of the country’s traditional financial system. He stated:
There are loan sharks that charge between 20% and 25% per month. We want to avoid that.
According to Steiner, this is because more than 80 percent of small businesses in El Salvador do not have a bank account. However, in order to receive these loans, companies would not have to submit to the same requirements as banks, thanks to the introduction of the Bitcoin Act in the country.
Steiner also spoke about the annual interest rates on the loans, stating that depending on the risk of each project analyzed, they are the lowest on the market – even more so when the only option is to borrow money from loan sharks.
What do you think of the cryptocurrency-based loans El Salvador is willing to lend? Tell us in the comment section below.
Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late in the game and entered the cryptosphere when the price surge took place in December 2017. He has a computer engineer background, lives in Venezuela and is socially impacted by the cryptocurrency boom. He offers a different take on crypto’s success and how it’s helping those who are unbanked and underserved.
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