Venture capital firms despite having high business prospects have failed to make their mark in the country for lukewarm response from entrepreneurs, said pioneers in the field.
Reasons, they say, are multifarious -- mainly lack of backup support from government authorities, like framing operational rules.
Such slow responses have frustrated the owners of venture-capital firms, which started off in the early 1990s.
Top executives at the venture-capital organisations said private firms were found reluctant to share equities and profits with them, ostensibly for some lack of understanding of this new mode of capital investment.
And this is seen as the key reason behind the less-than-expected levels of business output.
They said the entrepreneurs have conceptual problems relating to the operations of venture capital.
Venture-capital companies keep a third-party provision while they exit the firm after a certain period and, according to many, it is one of the barriers to growth of the business.
Currently, Bangladesh has four venture-capital firms, with Grameen Fund pioneering the sector in the early 1990s.
But, the Grameen Fund is now providing loans to the SMEs by diverting their business focus from the venture capital.
Venture capital is financial capital provided to early-stage, high-potential, and growth-start-up companies. The investment is made for a period of three to five years.
Venture-capital fund, a type of private equity, earns money by owning equity in the companies it invests in.
Dr Zia Uddin Ahmed, chairman of Venture Investment Partners Bangladesh (VIPB) launched in 2005, told the FE there were no rules governing the venture-capital firms here.
The VIPB has around 100 companies it invested in -- mostly small and medium enterprises with equity provided between Tk 0.5 million and Tk 2.0 million.
Dr Ahmed said for lack of such type of legal framework many firms are not interested about their equities.
He also said they cannot verify the financial data provided by the interested firms for lack of legal provision.
When contacted, a highly placed source at the Bangladesh Stock Exchange Commission (BSEC) Commissioner told the FE that they were yet to make a move to prepare the rules and regulations for these funding firms.
He said the BSEC was now busy preparing other rules and expecting completion of those early next year.
"We're expecting that we will take move for the same in January 2015," Mr Khan told the FE.
Shawkat Hossain, managing director of Bangladesh Ventures, said they are now searching for entrepreneurs to invest as they are not getting good responses from the cash-starved private manufacturing or service- providing firms.
This firm has so far provided Tk 22.8 million to two small and new firms in more than last two years of operations.
He said they cannot do aggressive marketing as they have limited funds. The firm has a Tk 200-million fund.
Mr Hossain also said they face tremendous problem while determining the valuation of the firms they want to invest in.
"We see future value of the firms, but Bangladesh has no such type of professionals. This is because of lack of rules concerned," he pointed out.
Md Sabur Khan, chairman of newly launched Bangladesh Venture Capital, said his firm invested in two small companies.
Mr Khan with high hopes said: "There are some pains in the venture capital and we want to embrace those."
The companies that remained in operation have been running their business by taking 'no-objection certificate' from the BSEC and the Bangladesh Bank.
Neighbouring India has more than 200 such companies after promulgation of rules and regulations in 1996, sources said. A large number of venture-capital companies have been formed in Pakistan after formulation of necessary rules in 2001.
jasimharoon@yahoo.com
