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

How can credit policies be designed to address unemployment and poverty in Cape Verde?
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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.

About this Publication

By Baptista, J.A.G., Ramalho, J.J.S. & De Silva, J.V.