Written by The Banking Post
In a significant move to boost the startup ecosystem in Bangladesh, the Bangladesh Bank has issued a comprehensive master circular aimed at easing institutional financing for startup ventures. This initiative is expected to foster innovation, generate employment, and accelerate economic growth by providing structured financial support to startups.
According to the newly issued circular from the SME and Special Programs Department of Bangladesh Bank, startup companies will now be recognized as a distinct category of business entities. Startups will qualify for financing if they are within two years prior to formal registration or up to six years after registration.
The circular emphasizes the inclusion of university-based startups, social enterprises, and new product innovations under this policy. Each bank has been instructed to establish its own dedicated “Startup Fund,” which will provide equity-based financing exclusively. The size of such funds may reach up to BDT 500 crore.
Key Highlights from the Circular:
Startups will no longer require prior approval from Bangladesh Bank for eligibility. Banks and financial institutions can evaluate startups based on defined criteria.
The maximum loan/equity support limit has been increased from BDT 1 crore to BDT 8 crore.
The maximum interest/profit rate has been capped at 4%, with quarterly compounding.
Banks will be exempt from the Internal Credit Risk Rating System (ICRRS) for providing loans/investments to startups until June 30, 2026.
Banks and financial institutions must maintain a general provision of 0.50% against unclassified loans/investments disbursed to startups.
Startups that receive refinancing or equity support may be classified into different operational stages, ensuring tailored financial support.
Furthermore, refinancing and equity support will now be linked to the performance and operational maturity of startups. This strategic classification enables more efficient and targeted funding, ensuring that startups at different stages of growth receive appropriate support.
Bangladesh Bank believes this circular will play a crucial role in facilitating easier access to finance for startup ventures, while also encouraging financial institutions to invest in high-potential, innovative projects.
In Conclusion:
With this newly introduced master circular, Bangladesh takes a bold step toward nurturing its growing startup ecosystem. The regulatory reforms and expanded financial scope are expected to not only unlock new opportunities for young entrepreneurs but also play a significant role in driving the nation’s economic transformation.
