Bangladesh Bank Unleashes Landmark Reforms to Power Startup Ecosystem
- Bangladesh Bank increases startup loan cap from Tk2 crore to Tk8 crore, categorized by the startup’s operational stage.
- A new venture capital company will be formed to channel equity investments into startups, using banks’ startup funds.
- Interest rates capped at 4%, ICRRS exemption until 2030, and 0.50% general provision to ease funding access and risk concerns.
In a major policy shift to accelerate the growth of Bangladesh’s startup ecosystem, Bangladesh Bank has issued a new master circular aimed at streamlining and enhancing financing support for entrepreneurs. The revised circular introduces several key reforms, including a quadrupling of the loan limit for startups and the launch of a new venture capital company to provide equity financing.
Recognising the role of startups as catalysts for innovation, employment, and sustainable development, the central bank has increased the loan ceiling from Tk2 crore to Tk8 crore, categorized by the operational stage of the startup. Previously, the limit stood at Tk1 crore, making this a significant move to address funding gaps for early and growth-stage ventures.
The master circular was developed through consultation with industry stakeholders and includes a more inclusive definition of startups, allowing businesses registered for up to 12 years to qualify. Entrepreneurs aged 21 and above can apply for financing, with no upper age limit imposed.
Among the most notable revisions is the expansion of financing instruments. Scheduled banks, which earlier provided only loans from their startup funds, can now offer both loans and equity investments. A key structural change involves the establishment of a venture capital company, to be initiated by Bangladesh Bank, which will channel equity investments into startups using funds from banks' startup reserves. These equity injections will be reflected in banks’ financial statements.
Additionally, banks and financial companies will now use their own funds to provide loan and investment support, while also being able to access a Tk500 crore refinancing facility established by the central bank.
The circular also introduces several borrower-friendly provisions, including a maximum interest rate of 4% for term and working capital loans, applied quarterly. To encourage lending despite inherent startup risks, the Internal Credit Risk Rating System (ICRRS) requirements have been waived for startup loans until June 30, 2030.
Moreover, banks and financial companies will now maintain only a 0.50% general provision against unclassified startup loans, further incentivizing participation.
The new policy marks a significant step in shaping a robust startup financing ecosystem in Bangladesh. Bangladesh Bank expects the changes to significantly improve access to capital, support national employment goals, and catalyse sustainable economic growth driven by entrepreneurship.
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