The government of El Salvador reportedly intends to offer crypto loans to small and medium enterprises (SMEs).
The National Commission of Micro and Small Enterprises of El Salvador (Conamype) plans to offer SMEs $10 million in crypto loans in the first quarter of 2022, Coindesk first reported.
Acumen, a Solana-based lending and borrowing platform, will provide US dollar funding to Conamype which will lend Bitcoin to businesses at an annual interest rate of up to 10%.
Acumen and El Salvador government adviser Monica Taher took to Twitter to share the news. Taher tweeted, “Bitcoin low-interest loans for small businesses in El Salvador thanks to the country’s Small Business Administration and Acumen, a defi protocol.”
According to the president of Conamype, Paul Steiner, one of the main drivers of the project is that 86% of Salvadoran companies do not have access to banking services and operate informally. As many as 98% of the country’s unbanked businesses rely on unregistered lenders offering annual interest rates averaging 2,300%.
“They are loan sharks charging between 20 and 25% per month. That’s what we want to avoid,” Steiner told Coindesk.
The Acumen protocol uses algorithmically defined interest rates to enable open financial applications. The project works by creating decentralized money markets, which are pools of assets with interest rates set algorithmically based on the supply and demand of loanable funds.
Users who provide assets to pools can earn a return from lending and staking while businesses benefit from low interest rates.
Read more: BoE chief concerned over El Salvador’s use of bitcoin as legal tender