Banks can form start-up fund with 1.0pc of net profits

SIDDIQUE ISLAM | Tuesday, 27 April 2021

The central bank has amended its policy allowing all banks to form their own start-up fund with 1.0 per cent of net profits instead of operating ones earlier, officials said.

To provide start-up entrepreneurs with loans, all the scheduled banks have been asked to keep 1.0 per cent of their net profits for the next five years from 2021, according to a clarification issued by the Bangladesh Bank (BB) on Monday.

Formation of the start-up fund will start with 1.0 per cent of net profits on the basis of the December's financial statement for 2020, it added.

"We've amended the policy, considering the size of the fund," a senior BB official told the FE while replying to a query.

The size of the fund will reach around Tk 28 billion if the banks establish their own start-up funds with 1.0 per cent of their operating profits, the official explained.

Besides, the banks will be allowed to use the central bank-formed Tk 5.0 billion refinancing fund after completing disbursement of their own start-up funds, according to the central banker.

"It will help reduce pressure on the banks," a senior chief executive officer of a leading private commercial bank (PCB) told the FE while explaining the possible impact on the amendment.

Earlier on March 29, the central bank formed a refinancing fund amounting to Tk 5.0 billion aiming to help startups expand and flourish in Bangladesh.

Meanwhile, the central bank has set eligibility requirements for the banks to utilize its Tk 5.0 billion start-up refinancing fund.

All state-owned and private commercial banks or specialised banks may avail the refinancing facility. But their classified loans cannot be more than 10 per cent.

Under the existing provisions, entrepreneurs aged between minimum 21 years and maximum 45 years will be eligible to get loan of maximum Tk 10 million from the fund with the highest interest rate at 4.0 per cent.

The repayment tenure will be a maximum of five years with one-year grace period.

A startup is a newly formed venture with particular momentum behind it based on perceived demand for its products or services. The intention of a startup is to grow rapidly as a result of offering something that addresses a particular market gap.

The startup ecosystem that began its journey in Bangladesh early 2010s has experienced a remarkable transformation in recent years.

Currently, the number of startups is more than 1,000 and is estimated to grow multifold in tandem with the digital ecosystem, according to a LightCastle Partners report.


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