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.