United Commercial Bank (UCB) has decided to form two funds totaling Tk 700 crore to cater to a growing demand for finance among promising local startups and e-commerce companies.
The UCB will invest Tk 100 crore to set up a Tk 350 crore "UCB Venture Capital Fund-One" following approval from Bangladesh Bank and the Bangladesh Securities and Exchange Commission, reads a Dhaka Stock Exchange website post yesterday.
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A little venture capital fund is available in the country, despite which there has been a proliferation of startups over the past couple of years thanks to increased entrepreneurial enthusiasm among youths.
Bangladesh currently has more than 1,200 active startups with over 200 new companies being born each year, according to a study by business consultancy firm LightCastle Partners.
Besides, prospective startups brought in more than $308 million from international venture capital funds in the last decade.
But still, funding for startups in Bangladesh as a percentage of the country's GDP is significantly low, said LightCastle in a paper released last September.
"We want to quench the thirst for equity for innovative startups. We see many startups have innovative ideas but they are struggling for funding," said ATM Tahmiduzzaman, deputy managing director of the UCB.
"We think there is a vacuum in this regard and financing from large institutions like the UCB will likely have a huge impact in accelerating the growth of startups and IT firms," he added.
The deputy managing director went on to say that there were over 2,000 e-commerce entities active in the country.
The UCB's board also decided to form a Tk 350 crore private equity fund called "UCB Private Equity Fund-One". The private bank plans to invest Tk 100 crore as a sponsor after getting the required approval.
"This alternative investment scheme is a virgin field too," said Tahmiduzzaman.
"So, we should invest here to bring maximum growth for both investors and entrepreneurs and finally contribute to the national economy," he added.
The board also decided to establish UCB Alternative Investments to ensure the smooth and successful management of alternative investment funds such as venture capital, private equity, and impact funds.