The government of El Salvador will offer cryptocurrency-based loans to small companies. Conamype, the National Commission for Micro and Small Enterprises, will be the link between the investors and a decentralized finance protocol called Acumen, that will be able to provide funding in stablecoins. The aim being to help small investors that have no credit history in the country.
Small Companies in El Salvador to Receive Cryptocurrency-Based Loans
Small companies in El Salvador will be able to receive funding to power their companies with cryptocurrency. The program is directed to include owners of small companies that still lack access to traditional finance tools. The loans will be offered through Conamype, the National Commission for Micro and Small Enterprises, which plans to offer these loans to their registered members.
The announcement was made by Paul Steiner, President of Conamype, and Mónica Taher, in charge of Tech & Economic International Affairs, during a Facebook stream on January 19. The organization will provide $10 million in funding to these companies using Acumen, a decentralized finance protocol based on Solana. The details of the deal are still being finalized, but volatility is to be minimized by virtue of Acumen giving the loans in dollar-pegged tokens, such as USDT and USDC, and borrowers repaying the loans in dollars.
Current State of the Lending Market
To emphasize the importance of these loans in the face of what small and medium companies are facing in the country to obtain financing, Steiner explained that most small companies are still not part of the traditional finance system in the country. He stated:
There are loan sharks charging between 20% and 25% per month. That is what we want to avoid.
According to Steiner, this is because more than 80% of the small companies in El Salvador lack a bank account. However, to obtain these loans, companies would not have to submit to the same requirements as they would with banking organizations, thanks to the introduction of the bitcoin law in the country.
Steiner also talked about the annual interest rates for the loans, stating that they would be the lowest in the market depending on the risk of each analyzed project — more so if the only choice is to borrow money from loan sharks.
What do you think about the cryptocurrency-based loans that El Salvador is preparing to give? Tell us in the comments section below.
Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he offers a different point of view about crypto success and how it helps the unbanked and underserved.
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