Venture capital to fund potential SMEs

CAPITAL is the crucial factor to launch any enterprise big or small. In Bangladesh, labour is abundant, but capital is in short supply. The institutional sources of fund including the banks have the supply of capital at a comfortable level. But they more often than not like to follow the beaten track. In the past, the government ministers would often criticise the banks for their shyness to extend credits to new business enterprises having potential. But they did hardly ever come forward to create the necessary condition for the banks to provide funds to such uncharted areas where the candidates, despite having potential in theory, were lacking in some other fundamentals such as collateral, proven track record as successful and established entrepreneurs and so on. In some cases, they would go for even risky and untested ventures under political pressure. There were also other instances of such bankrolling of less bank-worthy projects for other considerations, but that is a different story altogether. In sum, under the normal circumstances, banks were more eager to support only the established enterprises than new ones, which are yet to prove themselves. brBut then how would new business ventures lacking access to the traditional sources of funding will grow Capital market was one option being suggested by many well-meaning people in the government as well as others concerned. But as a matter of fact, the capital market is still an uncertain and slippery ground for fresh entrants with little experience to fall back upon. These are the hurdles faced by any small and medium scale enterprise in Bangladesh. The Information and Communications Technology (ICT) sector, for example, is the worst sufferer due to its lack of access to the conventional sources of fund. And as a result, its growth has remained stunted in spite of generous promises made ritualistically by the successive governments for its growth. brAgainst this rather depressing backdrop, it is heartening to note that the government has initiated a move to solve this chronic fund crisis being faced by the small and medium scale enterprises through launching a venture capital company in partnership with private entrepreneurs. It has further been reported in this paper that, of the initial capital of Tk 5.0 billion, 51 per cent would be borne by the government. Since there are no privately-run venture capital institutions, or individuals in the country to fill the lacuna, the government has taken the right decision to step in together with private entrepreneurs to meet a felt need in the economy. Once it starts operation, one may duly hope that purely private venture capital firms will also grow in the country in time. brVenture capital, by definition, lends fund to new and risky enterprises that have prospect for future growth through equity participation in the undertakings concerned. It needs to be added here that such venture capital firms also provide technical and managerial support to the entrepreneurs receiving such fund. This is particularly true of our small and medium enterprises (SMEs). The company to be launched for the purpose should, therefore, draw on the necessary expertise available to help out the potential SMEs in every way so that they may prove successful in the long run through generating more employment and thereby enriching the economy further. It is worthwhile to note here the venture capital's growing interest in the emerging field of computer technologies, especially the Internet in the USA. The result was a boom in venture capital business as well as the Net throughout the second half of 1990s. In Bangladesh, too, the emerging field of entrepreneurships based on computer technology may benefit from venture capital.