Bangladesh Bank to form Tk 500cr fund for startups
Bangladesh Bank has agreed to set up a Tk 500 crore fund to assist new companies to get off the ground. The board of directors of the central bank decided to make it easier for new entrepreneurs to obtain bank financing.
The decision was made at the central bank’s 412th board meeting on 11th March.
Anyone over the age of 21 can apply for a loan from the fund and will be eligible for a maximum of Tk 1 crore from the fund paying a maximum of four % interest while banks are certain to get it again from the central lender at 0.50 % interest rate.
The fund’s loans will have a maximum duration of five years.
Banks will be required to create a similar fund from their startups, with 1% of the operating profit, in addition to the Bangladesh Bank funds.
According to another Bangladesh Bank official involved in the fund’s formation, loans can only be taken once for each company.
The entrepreneur’s educational credentials, professional expertise, medical, social, and community guarantees may be accepted as collateral.
The loan can be repaid monthly or quarterly by the entrepreneur.
On the other hand, if the loan is not repaid promptly, the borrower would violate the applicable laws. Banks, on the other hand, must keep the promotion to a minimum in this situation.
Entrepreneurs with game-changing ideas will be given priority, even though their professional qualifications, technological skills, experience, and social acceptance can be examined in the same way that collateral is.
In contrast to the provisioning needed for standard loans, banks would be able to hold more affordable provisioning against the loans.
Currently, 20% of a listed loan in the sub-standard group must be set aside as provisioning. Loan providers, on the other hand, would be allowed to hold 5% in provisioning against start-up loans.
Under the start-up fund, banks must set aside 30% for questionable loans and 50% for poor loans, while it is 50 percent and 100 percent for all forms of standard loans.
When asked about the new funds, Sayed Almas Kabir, president of the Bangladesh Association of Software and Information Services (BASIS), told local media that they will encourage people to engage in the innovation culture.According to him,
“Access to finance has been a big challenge for startups over the last couple of years. This will help address that challenge,”
“If a guideline on the valuation of intellectual property is developed, entrepreneurs will be able to get finance against their software. This will encourage startups and growth of a culture of innovation,” he said.
The president of the Venture Capital and Private Equity Association of Bangladesh, Shameem Ahsan, likewise praised the decision.
“We think the fund should be channeled through venture capital firms to ensure proper compliance with the regulation,”
Shameem Ahsan also added that,
“The startups will also get mentorship. The expected outcome may not come if the finance is disbursed through government agencies,”
Another central bank official also added that Bangladesh Bank is yet to draw up a detailed policy to this end.
Mehjabin Zaman Mahee
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