MICROCAPITAL STORY: Government of Cape Verde to Create Microcredit Bank; Portuguese Bank Banco Português de Gestão (BPG) to Hold a 10 Percent Stake in the Bank

The Government of Cape Verde will open a microcredit bank in the island republic of Cape Verde in the first half of 2009. This announcement was made by the Finance Minister of Cape Verde, Ms Cristina Duarte in the capital city of Praia. According to a press release found on the Macau based news service macauhub.com, the bank would focus on the needs of poor families and small and medium enterprises in Cape Verde. Micro-enterprises account for nearly 50 percent (p 2) of Cape Verde’s employment, according to the report ‘Understanding the microenterprise sector to design a tailor-made microfinance policy for Cape Verde‘ published by the University of Evora. As per the press release on Macauhub, the new bank would have an initial equity of 300 million Cape Verde Escudos, approximately equivalent to USD 3.4 million. The release also stated that the Portuguese Bank, Banco Português de Gestão would hold a 10 percent stake in the bank, following approval from the Central Bank of Cape Verde, Banco de Cabo Verde.

The new bank, which is yet to be named, would focus on financial inclusion in addition to giving credit and technical support to projects/ businesses contributing to sustainable development in Cape Verde. No information is available so far on the interest rates the bank would charge. Ms Duarte, whose ministry has been working on the bank for two years, stated that the Government would seek participation from financial and social institutions, including non-government organizations (NGOs) in Cape Verde. No further detail on the involvement of these organizations was disclosed by Ms Duarte. She also stated that the bank would operate out of its headquarters (which hasn’t been named yet) and would not have any branches.

The economy of Cape Verde, an archipelago located off the western coast of Africa in the North Atlantic Ocean, is mostly reliant on tourism, transport and services. Despite its lack of significant natural resources, Cape Verde‘s poverty rate declined from 37 percent in 2001 to 29 percent in 2006 as per a World Bank estimate. The 2008 Human Development survey of the United Nations gives Cape Verde a rank of 102 out of 179 developing countries, measured on the basis of standard of living, life expectancy and literacy. In 2008, the United Nations recognized the ‘graduation’ of Cape Verde from the group of Least Developed Countries (LDCs) to Medium Developed Countries (MDCs). However, the World Bank also indicates growing disparity between the rich and the poor and the rural and urban areas of Cape Verde. In this regard, according to the Growth and Poverty Reduction Strategic Paper published by the Ministry of Finance and Planning of Cape Verde in consultation with the International Monetary Fund (IMF), the Government of Cape Verde has been implementing policies for poverty alleviation focused on the poorest regions of the country. These include supporting job generating activities, vocational training activities and income generating activities in the country’s poorest municipalities. So far, in terms of meeting the Millennium Development Goals (MDG) proposed by the United Nations, Cape Verde has ‘achieved‘ four of its seven goals, namely Universal primary education, gender equality, child mortality and maternal health. With respect to the first MDG (i.e. reduce, by half, the proportion of population living on less than one dollar a day), the United Nations cites ‘insufficient information‘ is available on Cape Verde’s progress towards poverty reduction.