Understanding the Microenterprise Sector to Design a Tailor-made Microfinance Policy for Cape Verde

This paper looks at micro-enterprise development as an effective means of addressing the problems of unemployment and poverty in the developing country of Cape Verde, where micro-enterprises account for about 50% of employment. The paper argues that:

• Several barriers discourage potential borrowers from participating in microcredit programs;
• In order to increase the rates of participation and success in microcredit programs, it is essential to tailor microcredit programs to the characteristics of microenterprise owners.

Providing a detailed profile of Cape Verde's microenterprises and micro-entrepreneurs, the paper:

• Investigates the relationship between their characteristics and the resort to outside seed capital;
• Utilizes the results obtained in the paper for defining appropriate microfinance strategies to support the creation, development and survival of micro-enterprises in Cape Verde.

The paper concludes that:

• Most micro-entrepreneurs in Cape Verde have:
  • Been women;
  • Created their firm before they were 40 years old;
  • Worked alone or with one employee;
  • Operated in the trade sector in urban areas;
  • A low level of education;
  • Started their businesses voluntarily.
• Micro-enterprises in rural areas are significantly different from those in urban areas;
• Most micro-entrepreneurs resort to outside capital due to insufficient savings.

The paper recommends:

• Development of adequate financing mechanisms;
• Adult education programs;
• Reservations for non-government organizations in microcredit programs;
• Provision of technical assistance;
• Training in management skills.