Mercantile Bank wants to set up a venture capital company as a subsidiary to finance and provide equity to startups.
“We have applied to the Bangladesh Securities and Exchange Commission for approval,” AKM Shaheed Reza, chairman of the bank, told The Daily Star recently. The subsidiary will be named MBL Asset Management Company.
Venture capital is a form of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. But it is relatively a new idea in Bangladesh. Traditional lenders finance startups with normal loan products. But there are institutions that have set up subsidiaries to deal with the issue.
LankaBangla Finance and IDLC Finance, two leading non-bank financial institutions, have set up venture capital companies.
Reza said Mercantile Bank has a product named “Udayan” to bankroll startups. A startup company gets a maximum Tk 50 lakh as collateral-free loan.
“We have so far funded 24 startups. Now we want to give it an institutional shape,” he said.
According to the Venture Capital & Private Equity Association of Bangladesh that started its journey in 2016, venture capital is a very important source of funding for businesses that do not have access to capital markets or banks.