El Salvador‘s government intends to give $10 million in crypto-based loans to small and medium-sized businesses (SMEs) beginning in the first quarter of 2022.
Acumen, a Solana-based lending and borrowing platform, will provide US dollar financial support to El Salvador’s National Commission for Micro and Small Enterprises (Conamype), a government body that aims to distribute financial assistance to local informal entrepreneurs and self-employed workers.
Acumen’s loans will have an annual interest rate of 6% to 7%, with the possibility of going up to 10%, according to Andrea Gómez, project manager at Acumen.
According to Steiner, 86% in El Salvador work in the informal sector and lack access to financial services. He stated that 98% of that percentage rely on unlicensed lenders who offer loans at yearly interest rates of 2,300 percent on average.
According to Steiner, the administration has been in negotiations with Acumen since October 2021, following the Central American country’s acceptance of bitcoin as legal cash. In the meanwhile, it is negotiating with several crypto lending platforms to give loans to Salvadoran SMEs, according to Steiner, who said that if signed, the agreements might reach $200 million.
Acumen will convert crypto to stablecoins — USDC or tether — and transmit US dollars to Conamype, which wants to provide US dollars to Salvadoran SMEs and entrepreneurs via the state-owned bank Banco Hipotecario.
Salvadorans would pay capital and interest in US dollars, and the government will repay US money to Acumen, according to Steiner.
El Salvador’s government and Acumen are currently working out the terms of the arrangement, according to Gomez, who noted that the product will be available in the first quarter of this year.
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