El Salvador to give crypto loans to local entrepreneurs

The government of El Salvador has announced it wants to give approximately $10m in crypto loans to small and medium-sized companies (SMEs).

According to El Salvador’s National Commission for Micro and Small Enterprises (Conamype) president, Paul Steiner, the loans to Conamype will be offered by Acumen – a Solana-based lending and borrowing platform.

He explained 86% of the companies in El Salvador operate in the informal sector and do not have access to banking services.

“Of that percentage, 98% rely on unregistered lenders offering loans at annual interest rates of 2,300%, on average,” he said.

“They are loan sharks charging between 20% and 25% per month. That is what we want to avoid.”

Steiner also added the government has started negotiating with Acumen last year after Bitcoin was approved as legal tender in the country.

He also confirmed that, along with these talks, the government plans to cooperate with other crypto lending platforms looking to provide loans to Salvadoran SMEs.

“If signed, the agreements could total $200m,” he added.

He went on to explain that Acumen plans first to convert crypto to stablecoins – USDC or Tether – and then send US dollars to Conamype, which will deliver dollars to Salvadoran SMEs and entrepreneurs through the state-owned bank Banco Hipotecario.

“Vice versa, Salvadorans will pay capital and interests in US dollars and the government will return US dollars to Acumen,” Steiner said.

Conamype plans to allocate financing to local informal entrepreneurs and self-employed workers. Acumen’s project manager, Andrea Gomez, added the annual interest rate will hover around 6% to 7%, although it could reach up to 10%.

According to Gomez, Acumen currently has 15,000 users and was authorised as a lender by the Central Bank of El Salvador in November 2021.