Criteria for approving loans to companies became slightly more restrictive in Cape Verde in the second quarter of this year, particularly for long-term loans, according to official data consulted today by Lusa.
According to the credit market survey published by Banco de Cabo Verde (BCV), between April and June, less favorable expectations regarding economic activity in general was one of the factors that justified the slight increase in the restrictiveness of credit approval criteria. loans for companies.
The level of non-compliance, the prospects for specific sectors of activity and the risks associated with companies without organized accounting also contributed.
“For individuals, the criteria remained practically unchanged”, noted the Cape Verdean banking regulator.
During the period under review, the central bank concluded that the banks surveyed registered a slight reduction in demand for credit from companies.
This reduction is justified by the use of alternative financing sources, namely loans from non-bank financial institutions, issuance/repayment of debt securities, as well as the reduced need for financing for investment.
Conversely, there was a slight increase in demand for credit from individuals, both for purchasing housing and for consumption, reflecting the “greater need” for financing for consumption expenses related to durable goods.
“However, the demand for credit for other purposes, according to banks, registered a slight decrease”, states the BCV, justified by the lower need for financing for investment and other unspecified factors.
For the next three months, the central bank expects banks to apply slightly less restrictive criteria when approving loans for companies, while those for individuals will remain practically unchanged.
“Banks also expect a slight increase in the demand for credit by companies and individuals”, outlined the Bank of Cape Verde, which concluded that the proportion of loan requests rejected by banks, both from companies and individuals, decreased slightly .
In August, in its financial stability report, the BCV considered that the Cape Verdean financial system remained resilient in 2022, but warned of the “high level” of defaulted credit by banking institutions, although the proportion in relation to the total credit has been decreasing since 2017.
“Despite the tendency to reduce the proportion of non-performing loans in relation to total credit, to single-digit levels, the ratio in Cape Verde still remains above the average for small island economies”, reported the central bank.
According to the BCV, levels of non-performing credit in Cape Verde continue to be higher than the values observed in Mauritius and Seychelles.
“The high cost of credit risk continues to condition the level of financial intermediation, the solidity and profitability of the banking sector”, he warned.
In its report on the state of Cape Verde’s economy, the BCV revealed that credit to the Cape Verdean economy grew 5.3% in 2022, but showing a slight slowdown of 0.8 percentage points compared to the 6.1% increase recorded in 2021.