Disbursement of loans from startup funds of thousands of crores of rupees is only 35 crores

Bangladesh Bank formed two funds in March 2021 for the startup sector. After that, more than 1000 crore rupees were accumulated in the fund in three years. However, till now 35 crore 20 lakh taka has been distributed among the startup companies.

People related to the startup sector say that the country's startup companies are not able to expand their activities due to lack of adequate funding. But despite having a separate fund for this, the entrepreneurs are not able to take sufficient loans.

According to Bangladesh Bank sources, two types of funds were formed on March 29, 2021 for the startup sector. The first of these is Bangladesh Bank's Tk 500 crore refinancing fund. The second is the banks' own startup fund consisting of 1 percent of the profits of 52 scheduled banks. Till December 2023, the total size of this fund made from the profit money of Scheduled Bank stands at 505 crore 10 lakh taka. The total amount of money between the two funds is more than 1000 crore rupees.

At the time of formation of the two funds, it was said that after the distribution of all the money of the banks' own funds, they can take the money from the 500 crore refinancing fund of Bangladesh Bank and distribute it among the startups. But the commercial banks could not spend that amount of their own funds properly. Till November 2024, the banks have disbursed loans of only 35 crore 24 lakh taka from their own funds to 159 startup companies. Accordingly, 969 crore 86 lakh rupees are still lying in the fund for the startup sector. And in 2024, if 1 percent of the profits of the banks are added to the fund, this amount will increase further.

FUNDS BIG, LOANS SMALL

After Bangladesh Bank's initiative in 2021, several banks set up large funds for this sector. For example, until 2023, Standard Chartered Bank formed a fund of Tk 61 crore 16 lakh, HSBC Bank Tk 25 crore 6 lakh, Dutch-Bangla Bank Tk 24 crore 74 lakh and BRAC Bank Tk 23 crore 15 lakh. Apart from this, the funds of Islami Bank Bangladesh, Eastern Bank and Pubali Bank are over Tk 20 crores. All other banks have more or less formed this fund.

However, no bank has been able to distribute loans to the startups as expected after forming the fund. Eastern Bank, which is among the five highest loan disbursing banks, has distributed loans of Tk 580 million, United Commercial Bank Tk 428 million, City Bank Tk 344 million, Dutch-Bangla Bank Tk 260 million and BRAC Bank Tk 259 million. There are 19 banks that have not distributed a single rupee of loan in this sector. Islamic banks are also lagging behind in loan disbursement.

More than 90 percent of startups fail globally. Because of this, commercial banks are less interested or active in startup financing

Syed Mahbubur Rahman, MD, Mutual Trust Bank

On the other hand, 159 startup companies have received loans so far, but the amount of loans is very less than the requirement. For example, Sonali Bank has given loans of 86 lakhs to 43 institutions. In other words, an organization received an average loan of 2 lakh taka. The loan amount of most of the organizations in this sector is below 50 lakh rupees. Only a handful of institutions have received a loan of Rs.

Fahim Mashroor, chief executive officer of startup company BdJobs, said, "Tk 505 crore has been allocated for the startup sector, but more than 10 percent has not been distributed - it is very disappointing." This small amount of money is not useful for the development of the entire startup ecosystem. In order to advance the startup sector of the country, both the size of the fund and the amount of distribution should be increased.

Syed Mahbubur Rahman, Managing Director (MD) of Mutual Trust Bank (MTB) said that more than 90 percent of startups fail globally. Bank financing in these ventures is more likely to eventually turn into bad loans. Because of this, commercial banks are less interested or active in startup financing.

where's the complicationThe concerned officials of Bangladesh Bank said that there are several obstacles in startup financing. For example, the maximum loan limit from this fund is 1 crore rupees. Because of this, it was not possible to give loans of more than 1 crore rupees even to good startup companies. Apart from this, the maximum age limit for startup entrepreneur is 45 years for getting loan. Limited companies have various obligations such as providing audited financial reports or providing surety or personal guarantee. Due to these reasons, many institutions could not take loans from the fund.**More than 10 percent of the fund has not been disbursed, it is very disappointing. To advance the country's startup sector, both the size of the fund and the amount of distribution should be increased
Fahim Mashroor, Chief Executive Officer, BDJobs**

An exchange meeting was held on January 6 at the office of Bangladesh Investment Development Authority (BIDA) with various stakeholders of the startup sector. There, Bangladesh Bank Governor Ahsan H Mansoor said that the startup sector is very challenging and it is not convenient for commercial banks. Out of Rs 505 crore, only Rs 35 crore has been disbursed. It's a failure.

However, the interim government is working to create new investment opportunities for the startup sector, the governor said. He said, a small company will be created with experienced venture capitalists. Fund money will be distributed through it. This money will be given in the form of equity and not in the form of debt.

However, entrepreneurs in the startup sector say that many established startups will not be interested in taking equity. Also taking equity is quite time consuming. So there should be both approaches—debt and equity.