The Bank of Cape Verde (BCV) reported on Monday (29) that the Cape Verdean microfinance sector, which increasingly facilitates credit for vulnerable groups and entrepreneurs, is facing fragilities that have been exacerbated by external factors.
“The microfinance domain in Cape Verde continues to show structural weaknesses, both due to the profile of the institutions and the nature of the clients they serve,” limitations that “have been exacerbated by external factors, such as international geopolitical tensions, which have affected economic and social stability, imposing greater challenges on institutions,” reads the latest report on the sector for 2024.
According to the BCV, despite progress, it is necessary to “strengthen the capacity of board members and management teams to ensure greater resilience in running institutions.”
The lack of effective supervisory mechanisms and compliance procedures, limitations in the quality of reported financial information, the growth of risky loan portfolios in certain institutions, and the geographical concentration of activity are other risks highlighted by the BCV.
The report also warns of “low financial literacy among clients, a factor that continues to affect the proper use of services and reduce the expected impact of microfinance on inclusion and economic development.” In terms of product offerings, “there continues to be little diversification, with a clear predominance of microcredit,” the BCV notes.
According to the report, three institutions together account for “around 85% of the loan portfolio,” with credit for trade and services representing 41.17% of the total gross portfolio.
The sector’s target audience remains largely composed of low-income populations with an entrepreneurial profile, “engaged in income-generating activities or interested in starting productive projects for profit.”
In terms of gender distribution, women accounted for 59% of total beneficiaries. The main performance indicators show growth of 6% in the sector’s total assets, while net results fell by 25% compared to 2023 — though the 2024 aggregate analysis covers data from only five institutions, while that of 2023 included six.
Last year ended with seven microfinance institutions registered with the BCV, the same number as in 2023 (five cooperatives and two mutual societies), two of which were “classified as large, given their operational size and market position.”
The sector’s representativeness, measured by the share of assets in Gross Domestic Product (GDP) and contribution to the total assets of the national financial system, remains low, standing in 2024 at 0.53% and 0.39%, respectively.
The BCV has been promoting the consolidation and transformation of microfinance institutions through the registration of entities and their board members, as well as the separation of social and financial activities.
Source: Lusa
