The Equity Entrepreneurship Fund (EEF) of Bangladesh Bank was initiated to promote and finance small and medium entrepreneurs. Industrialisation through aiding potential businesspersons in prospective fields is one of the primary goals of this initiative. Like many other noble ventures in Bangladesh, EEF, too, met its end due to rampant corruption. It is pleasing to note that the assistance fund has been reinitiated and necessary amendments made in the regulations to prevent any further unscrupulous activities. By bringing in a wider range of enterprises under the umbrella of this scheme and by raising the limit of assistance, this Fund has been made more beneficial for small and medium entrepreneurs. To make this venture a success, some articles of the regulations need to be reassessed and need urgent attention from the concerned authorities.
The following articles of the “Manual for the Regulation of Using EEF (ICT) Fund” need special attention –
3.2 The applicant firm must have three years of experience in the ICT industry prior to the date of submission of the application.
3.4 The firm applying for the EEF Fund must be registered under the Company Law Act 1994, as a Private Limited Company.
3.5 The applicant firm must be registered as an Exporter, that is, they need to have the ERC.
In reality, the group of young entrepreneurs we are trying to bring under the umbrella and provide assistance to flourish are mainly workers in the field of information technology (IT). Firms providing assistance in local technologies are mostly part of larger corporates who does not require the financial help provided through EEF.
The targeted young workforce primarily operates from their homes where they have set up a small office employing 3-12 programmers. They participate in online auctions for work orders. Up on winning the auction and completing the job, they collect the remuneration through online gateways and transfer the same via Western Union and other services to their account in Bangladesh.
Unless the work order is large, foreign companies do not bother to ask for official papers and bank information. 93 per cent of all such small enterprises do not have necessary papers like trade licences. For the same reason, they also do not have a bank account in their company’s name. Thus they have no chance of enlisting as an exporter; the need for maintaining balance sheets, tax return, company return etc is also neglected.
But they are working in an environment that is fiercely competitive and have maintained their performance at the highest standard. Irrespective of the fact that through conventional financial management their position may be that of unskilled labour, in terms of knowledge on Information Technology, they are of world standard.
As per the current guidelines, for a new business to avail financial assistance through EEF, the entrepreneur must register as a Limited Company, which roughly requires Tk. 35, 000. To set up an office, acquire Tax Identification Number, ERC, maintain Balance Sheet over three years, documenting Tax Return, Company Return etc. requires a sum exceeding Tk. 700,000. Preparing a Project Proposal, project blueprint, valuation charges and conveyance will need an extra Tk. 300, 000. Even after spending in excess of Tk. 12, 00, 000 he may not be certain of getting the financial assistance under EEF. An entrepreneur with the capacity for spending such a large sum of money has little need for state assistance in establishing a business.
It is apparent that rather than financing young, business individuals working in IT, the scheme has been made beneficial for people who understand economics and have good managerial and banking skills. Considering all this, young entrepreneurs do not stand a chance of receiving this assistance.
We are in no way advocating that IT professionals of the country show a blind eye to the conventional rules and regulations for operating business. We feel that it is important that the people must be encouraged to start a business with the least amount of paper work. Thus, as they go along doing business they will gain experience in managerial aspects and along with honing skills in the IT sector, they will also become efficient in financial management and become successful entrepreneurs.
To better assist the small, budding field of IT the following changes but be brought about in the regulations –
3.2 New enterprises may apply for the EEF but require submitting proof of experience in working in this field; electronic proof will be accepted.
3.4 Proposed, Proprietary or Partnership (Registered or Unregistered) Companies can apply for EEF. After assurance of assistance, before receiving the amount, the applicant firm must register under the “Company Law 1994” as a Private Limited Company.
3.5 After receiving financial assistance the applicant firm must enlist as an Exporter, i.e. they will have to get ERC.
The knowledge of producing software, applets and other skills must be assessed using a clear and acceptable procedure. The EEF officials must make the benchmark of the evaluation procedure to the young businessmen. To aid in the Project Plan, the ICB website must incorporate templates so that the applicant just has to provide the necessary data in the information sheet, while the rest is completed automatically.
Entrepreneurs must be given proper training in project planning and should be charged only if the proposal is accepted. To ensure proper management of funds this may be considered as an investment, which the applicant will gladly accept as capital for the project. But to reduce the risk involved necessary steps may be taken to adjust the assistance provided depending on the skill and the experience of the entrepreneurs.