Trained entrepreneurs bogged down by fund crunch, pandemic 

Fund shortage and the coronavirus pandemic prevented a staggering 97.41 per cent of trained entrepreneurs from launching their businesses between January 2019 and June 2020, a government survey shows.

Bangladesh Investment Development Authority’s (BIDA) evaluation survey report of Entrepreneurship and Skill Development Project (ESDP) showed that it trained 24,914 people in 64 districts spending around Tk 47.62 crore. Each entrepreneur got around 60 hours of training.

The government initiated the project to raise the private investment to GDP ratio to 34 per cent in the 7th Five Year Plan. It mainly targeted to provide the idea of investment among the unemployed but educated young men and women.

Bangladesh Bureau of Statistics (BBS) data shows that in the FY21, the investment to GDP ratio stood at 31.02 per cent, of this figure, private investment to GDP ratio reached 23.70 per cent and public investment to GDP ratio hit 7.32 per cent. Through this project, entrepreneurs were informed about trading law, systems, regulations and capital. The project also aimed to develop local industries for supplying raw materials and machine parts to technology-based global and heavy industries by creating skilled entrepreneurs through supplier and linkage development.

Although 60,070 people registered for the training, only 41.12 per cent of them, 75.5 per cent of men and 24.5 per cent of women, were trained. Only 645 of them managed new investments from different sources. Among them, 75 per cent arranged fund from personal references while 54 per cent received loans from bank and financial institutes and 30 per cent claimed to have received fund from NGOs.

They managed Tk 1.5 lakh in loans on average from banks, financial organisations and NGOs, but financial issues held back most youth.

On the issue, Dhaka Chamber of Commerce and Industry’s (DCCI) President Rizwan Rahman told The Business Post, “Under the conventional banking method, entrepreneurs cannot get collateral free loans. This is why they need cash flow from Alternative finance.

“At present, the government needs to prioritise start-up funding, venture capital and bond market.  At the same time, policy needs to be changed to boost investments through banks.”

He continued, “Providing just entry level training is not enough to develop entrepreneurship, it takes practical knowledge and skills to achieve success in a business. The government should introduce alternative sources of financing to reduce entrepreneurs’ dependence on banks.

“Even if the banks want to provide loans in easier terms, they cannot do so because of the rules and regulations put in place by the central bank. This issue is prevalent across the world.”

The government should list the micro and small entrepreneurs in Bangladesh, and facilitate micro-finance for them, he said.

Steps taken by trained entrepreneurs of ESDP are still at the primary level as the pandemic hit their initiatives in 2020.

Most of the trained entrepreneurs were from Dhaka and Chattogram divisions.

Among the entrepreneurs, 39.4 per cent had no experience and 35.9 per cent had some experience and 24.7 per cent had previous business experience. Meanwhile, 47.9 per cent of them believed that they gained knowledge about business management through the training which expanded their businesses.

About 84 per cent of the entrepreneurs – who already had a business before getting the BIDA training – witnessed expansion of their ventures. The trained entrepreneurs also created 37,046 jobs.

A massive obstacle to making fresh entrepreneurs was the pandemic, which posed risks to new investment. Although the entrepreneurs contacted the government and private organisations, the pandemic situation delayed the process. New entrepreneurs suffered from the lack of guarantors in securing loans from institutionalised sources and fell behind due to delays in financial supply for their businesses.

Regarding the investment weakness, the ESDP report said that there were shortages of financial assistance and loan funds for the trained youth and a lack of training centres at the upazila level. People are interested in securing jobs rather than becoming entrepreneurs. 

There is no database on investment benefits and market research. There are no one-stop service centres at the district level. 

Bangladesh Investment Development Authority’s (BIDA) Executive Chairman Md Sirazul Islam said, “Entrepreneurs have been trained in accordance with the projects’ goals, and it had no provision for financing the entrepreneurs.

“BIDA had taken an initiative to facilitate loans for some entrepreneurs by contacting banks and financial institutions through local administration. As per exiting rules, however, many entrepreneurs do not have the capacity to offer collateral to banks.”

Centre for Policy Dialogue’s Research Director Khondaker Golam Moazzem said, “BIDA should offer sector-based practical training in the second phase, on top of the first-phase training. Entrepreneurs will not get loans if they have a basic knowledge about a particular business.

“With a second stage training and a certificate, entrepreneurs will be able to qualify for a loan and will be able raise funds as well. The government should focus more on the entrepreneurs so that they can be successful at all levels – from launching their business and to marketing their products.”

Commenting on the idea of 2nd-phase training, BIDA executive chairman said, “The project has many successes. It would be better if those who have taken the training could be trained in the second stage.

“BIDA is working to train them alternatively. For this purpose, a project called Future Nation is being taken up with the UNDP. Under this initiative, entrepreneurs who have undergone the first-phase training will be able to receive more in the second phase.”

He added that many did not take training despite getting registered in the first phase, and these people will be trained in the 2nd phase.

The survey suggested developing ESDP’s national project based on the demand to expand trade at the national and local levels.

It recommended arranging separate skill development training for mid and advanced entrepreneurs and launching training centres at the upazila level to increase female entrepreneurs’ participation.

The report said that funds should be arranged to provide loans to entrepreneurs and those who launched businesses after getting training from ESDP.

A formal network should be formed by signing a Memorandum of Understanding with banks and financial institutions for providing loans to the entrepreneurs, it recommended.