Cape Verde Banking Hits Record 24.8% Solvency Ratio
The banking sector in Cape Verde reached a landmark milestone in late 2025, according to the latest data from the Bank of Cape Verde (BCV). The nation’s banking solvency ratio climbed to an unprecedented 24.82% in December, the highest level recorded since the central bank began tracking these figures in 2010.
A Stronger Financial Foundation
This historical high marks a steady upward trend for the archipelago’s financial stability. The solvency ratio—a key indicator of a bank’s ability to meet its long-term obligations and absorb potential losses—rose from 23.77% in 2023 and 23.93% in 2024. Additionally, the banking system’s liquidity surged to a record 28.30%, signaling that local institutions are well-positioned to handle financial demands.
The quality of bank balance sheets also showed significant improvement. Non-performing loans (NPLs) plummeted to 5.11% in December 2025, one of the lowest rates in 15 years. This represents a sharp decline from the 7.27% reported in 2023 and 7.91% in 2024. Similarly, overdue credit fell to 5.17% of total lending, down from 8.18% just two years prior.
Profitability Remains Robust
While bank profitability saw a slight cooling compared to previous peaks, the sector remains highly lucrative. The return on equity (ROE) for 2025 stood at 18.08%. Although this is a slowdown, it still represents the second-best performance for the industry in 15 years.
Cape Verde currently hosts eight commercial banks. The BCV classifies four of these as institutions of “systemic importance,” a designation that requires them to maintain specific reserves to protect the broader economy against potential shocks.
Experts Warn of Lingering Risks
Despite these glowing indicators, international financial institutions urge caution. The International Monetary Fund (IMF), the World Bank, and the Budget Support Group—consisting of partners such as the European Union and Portugal—have highlighted structural vulnerabilities.
Analysts warn that the Cape Verdean economy remains heavily concentrated in a few sectors, namely tourism, construction, and commerce. This lack of diversification makes the nation susceptible to external economic shocks. Furthermore, international partners continue to call for public sector reforms and better management of risks associated with state-owned enterprises to ensure long-term economic resilience.
Image: Pexels – anurag upadhyay
