A good many scheduled banks are failing to adhere to the central bank's directives regarding the disbursement of startup funds, as the aggregate total distributed by these banks is negligible.
Twenty-five out of 52 banks are yet to distribute any loan to the budding entrepreneurs, according to the latest data of the Bangladesh Bank (BB).
A total of Tk 8.39 billion has already been raised as per the December 2023 central bank data.
A Tk 5.0-billion revolving refinance fund styled 'Start-up Fund' has been set up by the BB with intent to create new entrepreneurs and inspire self-employment.
All the scheduled banks have also been instructed to form their own 'start-up' fund from their yearly operational profit.
According to sources, not a single loan has been distributed from the fund created by the Bangladesh Bank thus far.
Of the total, scheduled banks distributed Tk 80 million to 50 female customers until December 2023.
Tk 0.27 billion was disbursed to 133 customers until December 2023, whereas it hovered at Tk 0.16 billion until June 2023.
The central bank data disclosed that Tk 0.04 billion was disbursed to 18 customers under the 'Start-up Fund' until June 2022.
The BB instructed the banks to establish a "Start-up Fund" by allocating 1.0 per cent of their annual net profit each year, beginning in 2020 and continuing for the next five years.
This directive was issued in 2021.
The maximum interest rate of this loan is 4.0 per cent for the end user and banks can lend up to Tk 10 million for a five-year period.
The startup ecosystem that began its journey in Bangladesh in the early 2010s has undergone a remarkable transformation in recent years.
Currently, the number of active startups is more than 1,200 and is estimated to grow multifold in tandem with the digital ecosystem, according to the Bangladesh Hi-Tech Park Authority's website updated on 29 March 2023.
In addition, the BB has also created a separate fund of Tk 5.0 billion to facilitate refinancing options for startups.
By June 2023, Tk 0.16 billion was disbursed from this fund to support 70 customers under the 'Start-up Fund' initiative.
By June 2022, the startup fund accumulated Tk 1.31 billion. As of 30 June 2023, contributions from various banks boosted the total amount to Tk 3.31 billion.
Refinance from this fund will be used to promote innovation and development of the marketing of new products/services/processes/technologies, which will create a disproportionate return on investment to commercially successful investors.
A BB official said loan disbursements by banks among such ventures were poor as there were some gaps among entrepreneurs in the country.
The central bank mulls changing existing policy to speed up and raise fund disbursements, he added.
A startup is a newly formed venture with particular momentum behind it based on perceived demand for its products or services.
A startup intends to grow rapidly as a result of offering something that addresses a particular market gap.
All banks were instructed in the bankers' meeting held on 16 June 2022 to finance at least three customers in a year under the start-up fund facility.
AKM Fahim Mashroor, CEO of Bdjobs.com, expressed disappointment that the startup's funding falls short of expectations.
He suggested that the central bank ease loan terms, such as lowering the threshold to Tk 10 million, to alleviate the challenges faced by aspiring entrepreneurs.
Mr Fahim emphasised the need to enhance banks' capacity to efficiently distribute such loans.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, has recognised the insufficient loan volume allocated to various ventures by banks.
"For top executives or managing directors, handling such funds becomes challenging as they are predominantly occupied with a lot other issues like dealing with larger loans than looking at this handling significant and larger financings."
"It's also a mindset issue. Financing startups and giving commercial loans are not the same things," added Mr Rahman.
He proposed the idea of establishing a dedicated independent professional body to oversee a pooled fund from all banks separately, which could potentially improve utilisation of such fund.
"To make the fund more attractive, we can think of giving this as equity, which is a general global practice, than giving the amount as loan," he concluded.
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