The Financial Express

Some thoughts on entrepreneurship development

| Updated: November 04, 2020 21:47:30

Lankabangla and Fianancial Express Lankabangla and Fianancial Express
Some thoughts on entrepreneurship development

Rapid transformation of the young population, in particular, into productive forces is the crying need of the country. Unemployment rate among the educated youth has assumed an alarming proportion. The government lays more emphasis on job creators rather than job seekers and has a strategy to generate self-employment opportunities. We need quick economic recovery  in terms of  GDP  growth lost  due to the impacts  of  COVID-19. More and more business enterprises  need to be set up  to magnify the growth making capacity. It is very crucial to increase the momentum of, and to improve the effectiveness of entrepreneurship development (ED). It is the government that should   assume the total responsibility for entrepreneurship development.

We observe that entrepreneurs are being developed by several government organisations under different programmes. However, such development process seems not orchestrated enough. The following suggestions may streamline the existing system of entrepreneurship development: .

(i) Comprehensive industry (including service sector) classification, sub-classification, demand-supply analysis and gap determination are required. Adequate database is essential. A would-be entrepreneur cannot do the groundwork in the dark. Business directory for established enterprises is found but what types of businesses are potential is not available in large number. One may argue that it is the basic qualification of a potential entrepreneur to generate the idea of business he or she is going to launch. In reality, very few persons would pass the test. They need spoon-feeding in most cases, at least for the first time.

(ii) New skilled trades should be identified. Their demand-supply analysis and gap determination are required. It is very important to ensure proper and careful selection of entrepreneurs as trade skills are highly related to an entrepreneur's own ability, aptitude, and family tradition.

(iii) Research and development (R&D) activity lies at the heart of entrepreneurship development. Bangladesh Council of Scientific and Industrial Research (BCSIR)  carries out product innovation in its centres located  in Dhaka, Chittagong, and Rajshahi. Budget allocation for development activities is not adequate. Bangladesh Jute Research Institute (BJRI) is also engaged in new product development. It is very essential to set up more research institutes based on potential category of industry and type of product to expedite product innovation activities and outcomes. Development of new, innovative or diversified product ideas can create demand for new businesses as well as entrepreneurs. Public investment in R&D for the industrial sector should be augmented significantly.

(iv)    Entrepreneurship development programme should be started with a digital registration process. Orientation and training programme would be the core strategy to develop potential entrepreneurs. Unless registered, none can attend the training programme. Primary registration of trainee entrepreneurs should be introduced nationally by the government. What body can perform this routine task? We know that many government organisations like Bangladesh Industrial Development Authority (BIDA), Ministry of Youth and Sports (MOYS), Small and Medium Enterprise Foundation (SMEF), Bangladesh Industrial Technical Assistance Centre (BITAC), and Bangladesh Small and Cottage Industries Corporation (BSCIC) are engaged in entrepreneurship development services. We should contemplate on whether we can assign the whole programme of entrepreneurship development to any separately formed national body for the benefits of synchronisation and better goal-congruence.

(v) Orientation courses for the primarily registered  should be  conducted  in order to sort out  potential entrepreneurs  and to get them finally registered with complete database on their education, resources, family, previous  training and experience, career liking, preference for business type etc. Biometric  data  can also  be added.

(vi) Visionary and well-designed training programmes for  finally registered potential entrepreneurs for a suitable industry or service or trade  should be imparted. Trainees  should be first encouraged to present new product ideas. Due care is to be exercised to ensure that no trainee resorts to imaginary or  imitated business idea. Presumably, many a trainee would not be able to generate or present new potential business idea. They must be provided with  ready  business or product ideas to be procured from product innovation research institutes (such as BCSIR, BJRI and so on).The basic objective  of training  must be  to identify, develop, and make entrepreneurs so that they can  enter and enrich  the business world with new enterprises. The idea of  training for the sake of training  should be  totally abandoned. Every successful trainee would leave the training institute with a project profile for implementation.

(vii)   As regards project financing, a certain amount of equity fund from each finally registered and trained entrepreneur (or from a group of potential entrepreneurs) should be taken and deposited to the National Start-up Fund. The fund so collected must be put to growth process through Special Sanchay Patra targeting new entrepreneurs only. Besides this, yearly budget allocation for that fund should be made and duly accounted for. This fund would continue for five years and be used as financial guarantee for the loan to be extended for implementation of the new project. The fund must be properly managed.

(viii)  A separate ED Bank may be established under joint ownership by the existing banks. Participating banks would provide fund to ED Bank as loan and ED has to repay. Only new projects submitted by new entrepreneurs are to be financed by ED Bank. New projects would enjoy no further loan facility from ED Bank soon after repayment of the entire loan dues on schedule. Subsequent funding may be available from other banks. ED Bank would also be funded with broad-based share capital as it would be a public limited company.

(ix) The ownership form of every new project (except cottage and micro entrepreneurs) ought to be a public limited company. They should procure significant portion of project capital from the issue of shares. As there is no scope for cottage and micro entrepreneurs to form a publicly held company, the government credit guarantee scheme for the lion's share of loan should be offered to them. The lending institution (ED Bank) would have to give top priority  on  highly supervised and digitally monitored credit system.

(x) A new enterprise definitely needs fund. If we emphasise more on equity fund, some reforms in capital market management and Company Act are necessary. Unfortunately, capital market pricing rarely responds to the financial fundamentals of the concerned company. Many a time, bubbles are observed. SEC should frame a regulation that the price of any share of a company not incurring loss shall not fall below the issue price of that share, and the pricing mechanism shall in no case violate the financial fundamentals. The Company Act needs to be amended to insert stringent regulations regarding appointment and compensation of directors or CEOs, and other top managerial personnel from controlling shareholders' circle of relatives or friends or family or familiar persons. Some principles of good corporate governance are required  to be  laid down.

Entrepreneurship development and subsequent project management are not an easy task. An individual should get registered first and then pass the tests of orientation, and intensive training to become a potential entrepreneur. Orientation and training programmers should  be free of cost and successful trainees may rather be given special financial and non-financial incentives. In these days of digitalisation, the total process of developing entrepreneurs, financing, and project operation should be performed and monitored digitally in order to ensure transparency, accountability, integrity, ease of implementation, and to safeguard the interests of borrowing entrepreneurs, lenders, the government and the economy. 


Haradhan Sarker, PhD, is ex-Financial Analyst, Sonali Bank & retired Professor of Management.

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