Wednesday, 6 July, 2022

Alternative investments stagnant for lack of policy support

Alternative investments stagnant for lack of policy support

Bangladesh’s alternative investment sector is yet to flourish as there is a lack of policy support for fundraising and management at the institutional level, experts opined.

Market analysts and fund managers suggested giving tax rebates to investors to help flourish such investments.

This investment is a new financial concept covering mainly three types of finance — venture capital (VC), private equity funds and impact investment.

LightCastle Partners’ Financial Inclusion and Investments Director Shawkat Hossain said the government should provide tax rebates to investors to help support the alternative investment in the country.

“The new type of investment needs incentive in the budget as local businesses will increase participation alongside foreign ones. Investors need tax rebates and other facilities to secure their money,” Shawkat Hossain, former general secretary of VCPEAB, told the Daily Sun.

This new type of investment has become familiar in the country when the Venture Capital and Private Equity Association of Bangladesh (VCPEAB) started its journey in 2016 with a vision to strengthen the investment environment through alternative investment.

For any economy, banks support short-term finance while non-bank firms inject funds for midterm and capital market and alternative investment is the only way to support business in the long term.

More than 10 alternative fund managing firms have been working in Bangladesh in collaboration with local and international investors.

VCPEAB Chairman Shameem Ahsan recommended injecting a fund of Tk 5 billion to the alternative investment sector through Bangladesh Bank and Start-up Bangladesh.

“We have also recommended a reform in Bangladesh Bank and IDRA policies so that banks and insurance companies can invest in venture capital fund and amend the Trust Act so that provident fund and gratuity fund can be executed,” Shameem, also a general partner of Pegasus Tech Venture, told the Daily Sun.

The investor thinks that start-up sectors can contribute 5 percent of the gross domestic product in Bangladesh by creating 10 million new jobs by 2031.

In Bangladesh, fund managers have been paying two percent stamp duty and 35 percent corporate tax, which is almost 20 percent higher than other mutual funds.

The VC fund is the lone way to finance businesses at an early stage with a higher risk in return for investment. It is especially dedicated to the entrepreneurs related to information technology-enabled services. As per the Bangladesh Securities and Exchange Commission (Alternative Investment) Rules, 2015, the minimum size of an alternative investment fund should be Tk 100 million which will have a lifetime of 15 years.