Dr. Zia U. Ahmed, Chairman of Venture Investment Partners Bangladesh:
Monday, 17 May 2010
VIPB is just two years old and so it is very early to say whether we are a success or not but we have taken the initiative and it focuses at the right element of the enterprise segment in Bangladesh, so we feel that there is a potential for success if we can steer it right and maintain our integrity and focus. Our idea is to promote both small and medium enterprises in Bangladesh. As it's a joint venture with US based NRBs and Bangladesh institutions, another element is to promote NRB investments in Bangladesh. Currently we have an asset of Tk.206 million which is very insignificant in the context of Bangladesh but an interesting challenge for us to see just the market in Bangladesh and we have made over 368 investments beginning as low as two hundred thousand taka to ten million. Cumulatively we have invested in these 2 years, Tk.276 million. Like I said our equity holders are the local banks, insurance companies, and local and expatriate investors.
We are focusing on the enterprise segment which is the small and medium enterprises in terms of numbers and in terms of potential growth and also in terms of the impact on economy. We have a criteria of investments and basically in the FD segments with a broad spectrum of investment including micro finance first year graduates emerging young and female entrepreneurs and existing businesses with limited access to capital. Essentially we are looking for entrepreneurs what we call 'the missing medal'; who are too big for NGOs and too small for banks and because we are risk capital, we don't use collateral as a means of securing our fund. The main collateral is actually the entrepreneur. So if we look at strong and visual market demand of the entrepreneurs products and business plan we look at the competitive advantage of the product in the market in Bangladesh. Track record, this is a standard language, strong management track record essentially of the entrepreneur in this case, commitment to transparency without that we are actually a sitting duck. So the transparency of the entrepreneur that we work with is the most critical element, in this case desirable growth, expansion plan and willingness to accept technical support and risk factors as well.
What we have done here is the innovation; we have combined a traditional lending and microfinance practices in Bangladesh and integrating it with equity finance for innovative investments. In all our equity investments we are sure that our organization is a minority shareholder but this takes into account the typical South Asian mentality, the entrepreneur doesn't want to give up the majority share. We try to provide additional services aiming and strengthening the business and therefore our business development and technical advisory service is a critical element of ours for an old packet but for the integrated package. One of the most important parts is market linkage, unlike banks, we work as partners in the investment project.
As I mentioned earlier we do have market linkage capacity which a normal bank does not provide. We are now working in 17 districts and we are hoping to extend to 31 districts this year and hopefully 50 districts by 2011. The numbers I say as of March 31, we have 368 clients, our mean is Tk. 752,000 where we have the maximum is 10 million which is 1 crore taka. This is the sectors I mentioned that food and agriculture which is 41%, is the largest segment for us.
We are trying to educate the farmers to treat farming as a business. They have to adopt new methods and new ways of organizing themselves as farm enterprises. So what we have done is put 49 marginal potato farmers in Gozaria into a company, a private limited company whereby the products are being stored in a cold storage company. The farmers individually grew the potatoes with funds taken from us and then the company took some additional capital to put the potatoes in the cold storage so that the farmers get paid the cost of the potatoes that they grew as individual farmers and then sold to the company as individual farmer shareholders, now this has held them not to sell at this value in the market. We have done similar things in the fisheries area. Besides that we are going into IT's. We are also doing revenue sharing with an IT company that is providing softwares for the telecom industries such as Grameen. Grameen sends our cheques directly to us which reduces our risks and our return from that guy is almost 28 percent annually and he is coming for more because I think the business in the telecom sector for software valued services is pretty good. Thank you for your time.
We are focusing on the enterprise segment which is the small and medium enterprises in terms of numbers and in terms of potential growth and also in terms of the impact on economy. We have a criteria of investments and basically in the FD segments with a broad spectrum of investment including micro finance first year graduates emerging young and female entrepreneurs and existing businesses with limited access to capital. Essentially we are looking for entrepreneurs what we call 'the missing medal'; who are too big for NGOs and too small for banks and because we are risk capital, we don't use collateral as a means of securing our fund. The main collateral is actually the entrepreneur. So if we look at strong and visual market demand of the entrepreneurs products and business plan we look at the competitive advantage of the product in the market in Bangladesh. Track record, this is a standard language, strong management track record essentially of the entrepreneur in this case, commitment to transparency without that we are actually a sitting duck. So the transparency of the entrepreneur that we work with is the most critical element, in this case desirable growth, expansion plan and willingness to accept technical support and risk factors as well.
What we have done here is the innovation; we have combined a traditional lending and microfinance practices in Bangladesh and integrating it with equity finance for innovative investments. In all our equity investments we are sure that our organization is a minority shareholder but this takes into account the typical South Asian mentality, the entrepreneur doesn't want to give up the majority share. We try to provide additional services aiming and strengthening the business and therefore our business development and technical advisory service is a critical element of ours for an old packet but for the integrated package. One of the most important parts is market linkage, unlike banks, we work as partners in the investment project.
As I mentioned earlier we do have market linkage capacity which a normal bank does not provide. We are now working in 17 districts and we are hoping to extend to 31 districts this year and hopefully 50 districts by 2011. The numbers I say as of March 31, we have 368 clients, our mean is Tk. 752,000 where we have the maximum is 10 million which is 1 crore taka. This is the sectors I mentioned that food and agriculture which is 41%, is the largest segment for us.
We are trying to educate the farmers to treat farming as a business. They have to adopt new methods and new ways of organizing themselves as farm enterprises. So what we have done is put 49 marginal potato farmers in Gozaria into a company, a private limited company whereby the products are being stored in a cold storage company. The farmers individually grew the potatoes with funds taken from us and then the company took some additional capital to put the potatoes in the cold storage so that the farmers get paid the cost of the potatoes that they grew as individual farmers and then sold to the company as individual farmer shareholders, now this has held them not to sell at this value in the market. We have done similar things in the fisheries area. Besides that we are going into IT's. We are also doing revenue sharing with an IT company that is providing softwares for the telecom industries such as Grameen. Grameen sends our cheques directly to us which reduces our risks and our return from that guy is almost 28 percent annually and he is coming for more because I think the business in the telecom sector for software valued services is pretty good. Thank you for your time.