Plan to form venture capital co shelved

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Shakhawat Hossain
The caretaker government holds back its initiative to form a 'venture capital company' saying that the time before the national poll will not be appropriate for taking up such a policy decision.
Finance and Planning Adviser Mirza Azizul Islam suggested keeping the proposal suspended although there were opinions from the Bangladesh Bank and the Securities Exchange Commission favouring the move, central bank and finance ministry officials said Tuesday.
Initiative to form a venture capital company in partnership with private sector was taken in August last to provide collateral-free loans to local companies having potentials.
The finance adviser suggested that potential companies could take financial assistance from the International Finance Corporation (IFC) and Infrastructure Development Company Limited (IDCOL).
IFC, a member of the World Bank Group, helps small businesses in developing countries gain access to finance.
IDCOL, a state-owned a non-bank financial institution, finances medium and large-scale infrastructure and renewable energy projects in the country.
The move to form a venture capital came after a central bank study found that companies with potentials to emerge as new industrial pathbreakers hardly have any access to credit under the conventional banking system.
The study said limited banking finance is a major constraint to the growth of the country's small and medium enterprises (SMEs), which account for almost 80 per cent of total employment in manufacturing sector.
Between 1986 and 2006, the country's labour force grew by nearly three per cent annually with SMEs, including some non-conventional sectors, absorbing the new workers.
Officials said the new company could be a major boost to high-tech, software, agro-based and engineering enterprises which find it hard to raise capital through the conventional banking sources.
In Bangladesh, the banks only lend money to 'safe' and 'established' companies, which can ensure a good return for their investment, they said.
Venture capital funds abound in the western countries where they provide collateral-free credit to 'highly potential yet risky enterprises' in exchange for equity.
Many of the top software companies in the United States, India and China have been bankrolled by the venture capital funds in the past one decade.
India has emerged as one of the top magnets for big global venture capital funds after allowing them to operate since 1988.
In the second quarter to June, private venture capital funds have invested US$238 million, a 120 per cent increase over the same period last year, according to Dow Jones newswire.