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  • Central bank to set up Tk 5b startup fund

Central bank to set up Tk 5b startup fund


Bangladesh Bank COURTESY

  • Bank
  • Staff Correspondent
  • Published: 13 Mar 2021, 10:32 AM

The Bangladesh Bank (BB) has decided to form a startup refinancing fund worth Tk 5.0 billion, aiming to develop entrepreneurship in the country.

The decision was taken at a meeting of the central bank's board of directors, held at its headquarters in Dhaka on Thursday, with BB Governor Fazle Kabir in the chair. The Bangladesh Bank is yet to draw up a detailed policy to this end.

The fund, which will be constituted in the form of a refinanced scheme,  will help new entrepreneurs aged 21 years and above start businesses, officials said. Bank will firstly disburse loans to clients and the banking regulator will later reimburse the funds to banks.

As per the decision, the concerned department of the BB will issue a notification mentioning different terms and conditions of the refinancing fund, they added. "The board has given final approval to form the fund to help develop entrepreneurship in Bangladesh," BB's spokesperson and executive director Serajul Islam said.  New entrepreneurs will be allowed to manage funds at a maximum interest rate of 4 percent and banks will get funds at 0.5 percent interest from the central bank. The maximum repayment tenure of the fund is five years.

A startup is a newly formed venture with particular momentum behind it based on perceived demand for its products or services. The intention of a startup is to grow rapidly as a result of offering something that addresses a particular market gap.

Another senior official at the BB said the central bank will announce a policy on the formation of another Tk 5.0 billion startup fund to be mobilized by all the scheduled banks from their own resources on the same ground. "The scheduled banks will have to keep 1.0 percent from their annual profit to form the refinancing fund," the central banker explained.

Professor Muhammad Mahboob Ali, Coordinator, Entrepreneurship Economics Programme of the Dhaka School of Economics, suggested the authorities concerned to utilize the fund properly. "Definitely, it will help develop entrepreneurship in the country if the fund is used properly," Dr. Ali said.

The startup ecosystem that began its journey in Bangladesh in the early 2010s has experienced a remarkable transformation. At present, the number of startups stands over 1,000 and is estimated to grow multifold in tandem with the digital ecosystem, according to a LightCastle Partners report.

The consulting firm had also pointed out that the startups in Bangladesh, despite being the most potent engine for growth, face challenges at three levels. First, the absence of proper mentorships and access to funds make it difficult for early-stage startups to escalate. Through proper implementation of accelerator and incubator programs and circumvention of capital needs through investors' network, this challenge can be addressed.

Second, due to market malpractices, the financial cost rises manifold resulting in the closing down of ventures at an early stage. Finally, the older generations have a negative outlook towards entrepreneurship and assume that one only does business if one fails to get a respectable job. Therefore, the younger generation often prefers waiting to get a job rather than creating it.

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