Provide more support for startups
The startup scene in Bangladesh has huge potential but needs policy support to meet its demand for funding and make a bigger contribution to the economy, according to experts.
For example, enhancing the country's brand image and ensuring accurate financial reporting could help local startups secure more foreign funds, they said.
These comments came at a pre-budget roundtable on "Venture Capital and Startups for a post-Covid Resilient Economy", jointly organised by the Venture Capital & Private Equity Association of Bangladesh and Capital Market Journalists' Forum.
"Startups are already making a good contribution to the country's job market, especially for younger generations," said Planning Minister MA Mannan.
Besides, they facilitate a number of services for citizens through innovation, he added.
At present, there are more than 1,200 startups in the country that employ more than 15 lakh people, according to Bangladesh Startup Consortium.
"We will try to create a more supportive atmosphere for startups," Mannan said, adding that it was a harsh truth that the nation's image in the world arena was yet to meet expectations.
"So, we need to improve it by showing our present development in order to get more foreign investment," he said.
Over the last five years, startups received $268 million in funding, of which $247 million came from foreign investors.
"Startups are growing in our country thanks to government support but they need more to do so at a higher pace," said Arif Khan, vice chairman of Shanta Asset Management.
Regarding the growth potential of local startups, he pointed out that Silicon Valley had a bigger economy than that of resource-abundant Saudi Arabia.
"So, we need to support startups as they have huge potential to earn money and create jobs," said Khan.
He recommended allowing different funds of the same fund manager to be invested in the same startup company.
Khan recommended that as the alternative investment funding scenario was at an early stage in the country, tax could be exempted for 10 years on dividend payments by a fund to investors in order to encourage investors to participate.
Khan, former managing director of IDLC Finance, welcomed a Bangladesh Bank initiative to fund startups, but said it needs to be clear whether it would be financed as loans or equity.
Recently, the central bank issued a circular ordering all commercial banks to set aside one per cent their net profit for startup funding.
Moreover, the banks should channel their special fund through venture capital funds because startup funding required expertise.
He also recommended reforming the wage repatriation process for foreign investors so that they can safely access their money using banking channels.
Bangladesh Investment Development Authority (BIDA) needs to work to improve the ease of doing business and the country's image before global investors, he said.
The Financial Reporting Council needs to ensure that the audited financial statements of startups reflects the actual picture of the company's business to protect investors, he added.
"Any wrongdoing by the startups must be penalised immediately to restore confidence in the industry," added Khan, also a former commissioner of the Bangladesh Securities and Exchange Commission (BSEC).
BSEC Chairman Prof Shibli Rubayat Ul Islam said startups could raise funds from the stock market.
Besides, a small capital board where small companies can raise funds is there for their convenience, he added.
Some companies have already shown interest to raise funds through the board, he said, adding that venture capital firms could raise funds by issuing bonds.
Funding will not be a problem because many foreigners are interested to invest here, Islam said.
A few bad startups can damage the image of the entire sector and so, the association needs to be cautious in this regard, he added.
Abu Farah Md Naser, deputy governor of Bangladesh Bank; Shaikh Shamsuddin Ahmed, commissioner of the BSEC; Maliha M Quadir, founder of Shohoz; Waseem Alim, CEO of Chaldal.com; and Shameem Ahsan, president of Venture Capital & Private Equity Association of Bangladesh, also spoke at the event.
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