50 Years of Independence

Govt to invest Tk 1 billion in 50 start-ups

BB also announces Tk 5bn start-up funds

Staff Correspondent

31 March, 2021 12:00 AM printer

Bangladesh will invest Tk 1 billion among 50 startups in 2021 marking birth centenary of Father of the Nation and golden jubilee of the country’s independence.

Meanwhile, Bangladesh Bank has announced a detailed policy to establish two separate refinance funds to help the start-up firms.

Of them, the refinance fund of Tk5 billion start-up fund will be created from own source while the commercial banks will form another start-up fund by transferring 1.0 percent of the banks’ annual operation profit.

SME special programme department of the central bank issued a circular in this regard on Monday. It was sent to the top executives of all scheduled banks.

In the Tk1 billion fund, the government’s ICT Division will facilitate the initiative under its privately registered venture capital firm - Startup Bangladesh Limited – to support innovative business models.

“The startup companies will enable to raise fund as seed, early stage and growth level investment through online application,” said an official of Startup Bangladesh, requesting not to be named.

The investment will take place in form of equity, convertible debt and grants in pre-seed, seed and growth stage startups.

“We invest through co-investments, as a fund-of-funds, and asset manager and provide other in-kind support to startups and stakeholders,” read a web statement of the company.

The Fund will support technology-based innovations to create new employment opportunities, promote under-represented tech groups, and foster entrepreneurship culture and bring transformational changes to lives of millions.

State Minister for ICT Zunaid Ahmed Palak and Deputy Minister for Education Mohibul Hasan Chowdhury are scheduled to open the venture capital fund on Wednesday.

SBL is working to develop venture capital ecosystem by providing support to early-stage tech-based companies in the form of capital, financial guidance, and operational guidance.

The state-owned venture capital fund started journey in March 2020 with an allocated capital of Tk 5 billion for entrepreneurs to innovate faster, create new jobs and develop technical skills in line with the Digital Bangladesh vision.

The business leaders welcomed the Bangladesh Bank’s Tk 1 billion fund.

“It’s really a good initiative, no doubt," said Syed Almas Kabir, president of the Bangladesh         

Association of Software and Information Services.

"Access to finance has been a big challenge for startups over the last couple of years. This will help address that challenge," he said.

He, however, said it was not possible for many IT entrepreneurs to comply with its collateral conditions, such as land and flats.

The BB directive said in many countries of the world, start-ups have emerged as successful organizations with proper patronage.

“If the bank loan or investment is available in favor of 'start-up', many potential entrepreneurs, can start their business,” it said.

The central bank formed of Tk 5 billion revolving fund for five-year tenure, which volume may increase in future based on necessity.

An entrepreneur can take loan maximum Tk 10 million from this fund.

All the scheduled banks will be eligible to avail start-up refinance fund, but the banks have to sign a participation agreement with SME special programme department of Bangladesh Bank.

About eligibility of loan from the fund, it said that the initiative proposed by the entrepreneur must be completely “new and creative.”

Applicant to be a new entrepreneur must obtained certificate from the government approved entrepreneur development organization on entrepreneurial development, business management, marketing, or other technical issues.

The entrepreneurs must have appropriate practical knowledge, experience and ability to manage new ventures, BB said.

The age of the entrepreneur must be minimum 21 years to maximum 45 years at the time of submission of loan proposal and fully engaged in the proposed initiative or project. The term of loan at customer level will be maximum 5.0 years. The grace period can be determined by considering the type of start-up initiative, but it will not be more than 1.0 year, the policy stated.

The interest rate of loan at customer level will be 4.0 percent only. The installment of such loan will repay in quarterly or half yearly basis.

Earlier on March 11, the central bank's board of directors took the decision formation of Tk 5 billion refinance fund to enable the new entrepreneurs to avail financing from banks smoothly.