Bangladesh’s banking sector is set to formally enter the startup investment space through a Tk425 crore equity-backed fund backed by 39 commercial banks, although questions over regulatory oversight and foreign banks’ participation remain unresolved.
The Bangladesh Start-up Investment Company (BSIC), formed under the guidance of Bangladesh Bank, will officially launch on Tuesday as the country’s first large-scale bank-backed startup equity financing platform, officials familiar with the process told TIMES of Bangladesh.
The initiative aims to channel banks’ unused startup financing allocations into equity investments for entrepreneurs outside the traditional lending structure.
Unlike conventional loans, equity financing allows investors to take ownership stakes in companies in exchange for capital while sharing risks and future profits.
Senior Bangladesh Bank officials said BSIC was created mainly to utilise the mandatory startup financing allocation equivalent to 1.0 per cent of banks’ net profits, much of which has remained unused because of operational and regulatory complications.
Although BSIC will eventually have authorised capital of Tk2,000 crore, operations will initially begin with paid-up capital of around Tk425 crore to Tk450 crore.
However, key structural issues remain unresolved before the launch.
Officials said no final decision has yet been made on how funds from nine foreign commercial banks operating in Bangladesh will be incorporated into the company, an issue involving nearly Tk169 crore.
“Foreign banks cannot participate in the same manner as local banks because their global compliance structures are much stricter,” a senior Bangladesh Bank official familiar with the matter told TIMES.
Officials said Bangladesh Bank and BSIC authorities are exploring alternative participation models that would allow foreign banks to join without violating overseas regulatory or governance requirements.
Discussions are also continuing over whether Bangladesh Bank will have any formal supervisory role over BSIC’s investment activities despite facilitating its formation.
BSIC will be governed by a nine-member board comprising representatives from five banks and four independent directors.
Association of Bankers, Bangladesh (ABB) Chairman and City Bank Managing Director and CEO Mashrur Arefin will chair the board. EBL, Mutual Trust Bank, Sonali Bank and Pubali Bank will also have representation.
Mashrur Arefin described the initiative as timely amid Bangladesh’s economic transition and said the company would follow a rigorous investment screening process.
“These are not loans. These are equity investments. So the evaluation process has to be fundamentally different,” he told TIMES.
According to him, BSIC will initially prioritise startups that have already demonstrated operational viability through products, prototypes or early business traction.
“We are eyeing big. We are eyeing to take Bangladeshi startups onto the global stage,” he said.
He also acknowledged that Bangladesh Bank’s supervisory role remains under discussion because BSIC does not legally fall under the definition of a commercial bank directly regulated by the central bank.
“Appropriate mechanisms are being explored through which some degree of supervisory or audit-related oversight by Bangladesh Bank may be incorporated,” he said.
Standard Chartered Bangladesh CEO Naser Ezaz Bijoy said foreign banks were still discussing the appropriate participation framework with the central bank.
According to officials, entrepreneurs aged above 21 will initially be eligible to apply for equity funding under three categories of Tk2 crore, Tk5 crore and Tk8 crore.
Bangladesh Bank separately operates a Tk500 crore refinancing scheme for startup lending through commercial banks, under which 11 entities have so far received financing, officials said.
