Financial institutes have struggled to roll out loans in the aftermath of the Covid-19 pandemic. Different governments have adopted different strategies to combat this problem. Among different countries, El Salvador is taking a unique approach to solving this problem. As with its economic system, El Salvador is rolling out cryptocurrency loans to small businesses in the country. Under this new scheme, the National Commission for Micro and Small Enterprises will give loans to small and medium businesses. Even business owners without any credit history will have the ability to use this facility. Paul Steiner and Monica Tahar from the National Commission for Micro and Small Enterprises announced the same in a Facebook live stream. The total pool for the loan will be $10 million in the beginning and will increase with time. Steiner added that the interest rates for these loans will be unmatched.
Despite big claims around this initiative, there is no clarity around how these loans will be provided. The problem of fluctuating crypto prices has not been addressed either. The National Commission for Micro and Small Enterprises will provide loans in stablecoins to minimize fluctuations, but that is not a fool-proof solution either.
If El Salvador manages to achieve this feat, it will be the first and only country to offer loans in cryptocurrency. Depending on the success of this scheme, El Salvador can embark on similar programs in the future. In the long term, crypto exchanges also have a chance to succeed in this new market.
