Meeting Startups' appetite for funds

FE Team | Published: February 18, 2024 21:40:02

It is of concern that startups, as reported in this newspaper, are facing severe fund shortages despite the directive issued by the Bangladesh Bank for granting easy loans to small enterprises. The central bank's instruction for all commercial banks to establish a 'Startup Fund' and provide loans to emerging entrepreneurs at low interest has hardly been complied with. Shockingly, 25 out of 52 banks have yet to disburse any loans to startups, in total disregard for the central bank's directives. Additionally, despite the existence of a Tk 5.0-billion revolving 'Startup Fund' refinancing facility to foster new entrepreneurs and promote self-employment, not a single loan has been disbursed.
A significant number of scheduled banks are found to be hesitant about offering loans to Startups as they fear problems with the recovery of the same. Such a fear is not without a basis. The central bank's funds -- Equity and Entrepreneurship Fund (EEF) and Entrepreneurship Support Fund (ESP) – introduced to promote small entrepreneurship have virtually failed to take off to any notable extent for various reasons. There is many a defaulter in the case of EEF. It is, however, imperative for commercial banks to take proactive steps for rectifying the situation and promoting Startups. If funding is hard to come by, the country cannot establish a vibrant startup ecosystem. Even though the policymakers have been repeatedly encouraging youths to become self-reliant and create employment, necessary support is not there to make that happen. Access to credit for young entrepreneurs must be ensured in order to give wings to their dream projects.
The present job market is far from being robust enough to absorb the annual influx of graduates from universities. This frustrates and exacerbates the challenges facing youths amid rising unemployment, economic stagnation, and escalating living costs. According to the Bangladesh Bureau of Statistics, the total number of unemployed graduates stood at 0.8 million, a staggering figure, by 2022, highlighting the severity of the issue. Many of these young individuals possess the talent, know-how, requisite energy, passion, and entrepreneurial acumen, with numerous success stories showcasing their potential to not only transform their own lives but also contribute significantly to the national economy and reduce unemployment. It is, therefore, imperative to empower young people by acknowledging and harnessing their skills and talents, thus shifting their roles from job-seekers to job creators. The government must undertake concerted efforts to support aspiring entrepreneurs by facilitating their access to easy low-interest loans, offering requisite training, fostering dissemination of innovative ideas, and safeguarding small enterprises from the challenges inherent in the local business environment. Under no circumstances should the enthusiasm of youth be allowed to fizzle out.
The current number of active startups exceeds 1,200 and those are eager to grow further. Startups can play a crucial role in driving economic growth, job creation, and technological advancement. But the chronic underfunding of startups poses grave repercussions for the economy and strangles the aspirations of the youth. Commercial banks, therefore, must change their approach to startups and leverage their expertise to catalyse growth within the sector. Moreover, the authorities should explicitly outline the credit policy and other facilities for young entrepreneurs, and implement the same. Overall, a comprehensive action taken jointly by the relevant government agencies and the central bank is needed to unlock the transformative potential of youth entrepreneurship.