Banks need tailored approach to start-up financing: BIBM

Commercial banks need to adopt a more tailored approach to financing start-ups while maintaining prudent banking practices, Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), said yesterday.

He made the comment at a seminar titled “Start-up Financing in Bangladesh: Can Commercial Banks Play a Significant Role?”, organised by BIBM in Mirpur, Dhaka.

Tap here to add The Daily Star as a trusted source

The seminar discussed the challenges and opportunities in start-up financing and ways to enhance the role of commercial banks in supporting the emerging start-up ecosystem, according to a press release.

Ezazul said start-ups often require a different financing approach, as their value may not be adequately reflected in conventional collateral or current cash flows. Their potential may instead depend on ideas, technology, data, human capital, intellectual property and future growth prospects.

He stressed that this should not mean compromising prudent banking practices. Banks need to strengthen their capacity to assess start-ups through better financial and transaction data, specialised appraisal expertise, relationship-based banking and a clearer understanding of different stages of the start-up life cycle.

Appropriate risk-sharing mechanisms could enable commercial banks to play a greater role in start-up financing. Credit guarantees, refinancing facilities, co-financing arrangements and stronger links among banks, incubators, investors and public-sector programmes could help promising start-ups bridge the gap between innovation and bankability, he said.

He also emphasised that building a sustainable start-up financing ecosystem would require coordinated efforts by commercial banks, Bangladesh Bank, government agencies, investors and entrepreneurs.

No single stakeholder can address the financing gap alone, he said.

The ultimate objective should be to establish a financing pathway through which promising start-ups can gradually move from idea-stage support and risk capital to sustainable commercial financing as their business models mature, Ezazul added.

Md Habibur Rahman, chairman of the BIBM Executive Committee and deputy governor of Bangladesh Bank, stressed the importance of developing appropriate financing facilities for start-up projects and creating a supportive financial environment for innovative and emerging enterprises.

A BIBM research team comprising Md Mosharref Hossain, Shamsun Nahar Momotaz and Tahmina Rahman, associate professors; Benazir Ishaque, lecturer; and Md Mohsinur Rahman, executive vice-president and head of SME banking at Prime Bank PLC, jointly presented a keynote paper.

The presentation was followed by an open discussion. Mohammad Tazul Islam, professor and director of training at BIBM; Syed Abdul Momen, additional managing director and head of SME banking at BRAC Bank PLC; Nawshad Mustafa, director of SME and special programmes department at Bangladesh Bank; Md Monjur Mohammad Shahriar, project director of the digital entrepreneur and innovation eco-system development project at the ICT Division; and AKM Fahim Mashroor, chief executive officer and co-founder of bdjobs.com Ltd, took part in the discussion.

Prof Md Shihab Uddin Khan, director of research, development and consultancy at BIBM, also spoke.