When coronavirus pandemic-induced inflation hit, Latin American central banks were among the first to hike interest rates, with further increases in 2021 and 2022.
Traditional banks’ lending rates grew exponentially, acting as a trigger to the growth of crypto platforms, which offer up to 50% lower rates and zero maintenance fees.
Ledn, a Canada-based lending platform with more than 125,000 users, started operating in Latin America in 2019. The region now accounts for 50% of the loans granted by the company.
Ledn offers credits in U.S. dollars and the USD coin (USDC) stablecoin, with an annual interest rate of 7.9%. When receiving USD or USDC loans, the collateral in BTC must double the loan. The company provided $500 million in loans in Latin America, with an average amount of a bitcoin-backed loan of $9,206.
Latin America is a region that has far fewer credit facilities than countries with similar incomes, such as Eastern Europe or South Africa.
Private banks are even more risk-averse when granting a loan. In Brazil, the largest private bank, Itau, offers personal loans with an annual interest rate that can go up to 172.85%.
Latin America has some of the highest inflation in the world, with an average of approximately 11% year to year. These numbers have even affected the steadiest countries, such as Chile and Peru, whose citizens have recently started adopting crypto as a hedge against inflation.
Latin America financial inclusion is still low. Up to 50% of its workforce works in informal conditions and therefore lacks a credit score necessary to apply for a loan.