El Salvador’s Fintech ecosystem and regulation
Fintech in El Salvador
Fintech companies have emerged in Central America out of necessity, mainly to make payments, execute transactions, manage finances and consult online in a simpler way. It is estimated that there are around 13 Fintech currently in El Salvador, a low number in the Latin American region but in Central America specifically it is an optimistic number that indicates that little by little the sector is developing in the region.
Fintech companies in El Salvador focus on the categories of financial advice (personal finance), electronic money, payments, lending and market provisioning. It also highlights the fact that 7% of Fintech companies are in the development stage (Diario El Salvador, 2021).
Regulation
Since 2015, the country has started to provide some regulations on the financial technology industry. Even the country’s central reserve bank is working on a regulatory framework that allows creating an orderly Fintech ecosystem. In fact, El Salvador has become famous for being one of the few countries that legalize bitcoin as an official currency of El Salvador. This means that the cryptocurrency will be legal tender in the country as an option.
Basically, the government is trying to modernize the state. The plan will focus, among other topics, on the management of personal data, cybersecurity and digital inclusion through fintechs (with a main interest in establishing guidelines regarding Electronic Money and the minimum rules that companies interested in participating as suppliers must comply with)
In the case of collective financing tools (crowdfunding in its forms of crowdequity, crowd-royalty and investment crowdlending), these have a regulatory barrier to entry. However, the problem lies in the fact that the raising of funds within the current regulatory framework regulates traditional intermediation activities (banking, insurance, stock markets) and not for this type of novel activities (relatively).
Lending Fintech.
In the case of lending platforms in El Salvador, these are still few. We can find one that operates throughout Central America. Recaudemos.org is the first social Crowdfunding platform for Central America; it is a non-profit association that promotes social projects of entrepreneurs in the region. Anyone with a socially relevant cause can participate, for example, community educational projects, help for victims of natural disasters, water for communities, among others.
Microfinance in El Salvador
Credicampo is one microfinance institution in El Salvador that focuses on providing loans to the agricultural sector. It has more than 35 thousand clients and has provided more than 50 million dollars in loans. Provides credit, savings, remittance and insurance services.
