Entrepreneurship Challenges in Bangladesh

LightCastle Analytics Wing
May 1, 2018
Entrepreneurship Challenges in Bangladesh

As an entrepreneur based out of Bangladesh, I faced (and still face) a number of challenges. See if you can relate to any of them!

1. Social Stigma

This is perhaps the most difficult of the challenges one has to wade through in Bangladesh as far as entrepreneurial pursuit is concerned. Starting from family, friends to acquaintances, most people are negatively and heavily prejudiced towards entrepreneurs. One of the reasons is that the society stereotypically brands entrepreneurs as ethically challenged and usually looks down upon them compared to professionals. Alongside that, there is also a risk factor when you are doing business compared to when you are a professional. As a result, family and friends discourage the idea of entrepreneurship.

I have seen budding entrepreneurs (yes, multiple!) join my company just to manage their future in-laws and their expectations.

Social stigma against entrepreneurs in Bangladesh
Social stigma

2. Capital

Usually capital comes from either taking loans from financial institutions or using one’s own savings. Compared to other developed nations, Bangladesh has a significantly higher interest rate. The average interest rate on loans was between 10–12% in January 2018. This reflects how taking loans is very expensive in Bangladesh. The financial organizations also make it very difficult for new businesses to take loans. This is a big obstacle many business owners face when trying to acquire capital. On the other hand FDR rate in Bangladesh is very high compared to other countries. Different institutions provide different rates but it still goes as high as 9.75%. Due to this the opportunity cost of using savings as the capital for a business becomes extremely high, as any given new business can yield a mere 10–15% profit on a good day. Hence, most investors shy away from investing in new businesses and keep their savings as FDR instead.


3. Legal

The legal aspect of starting a business is perhaps the most traumatizing experience of all.This happens due to asymmetric information and widespread corruption. No one is willing to provide complete information causing procedures to get stagnant without speed money. This is a big problem for any new business. Another major problem of Bangladesh’s legal system is the poor execution of its existing laws. In this case, I will be giving the example of the copyright law which provides protection for intellectual properties. In the west, we see they put a lot of emphasis on providing the

required protection for intellectual properties. Unfortunately, in our country, people are not very concerned with that. Anybody can copy another’s idea and start a brand of their own. This discourages innovation and innovative thinking, hampering the industry as a whole. Also, our legal system is not very helpful towards small companies fighting larger corporations, say for bad debt or delay in payments.

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4. HR

It might come as a surprise for many that there is a scarcity of good human resources in a country of 160 million people. This scarcity exists due to a lack of skilled population. This increases the production cost of the business as the company may have to hire more people to do a simple task which could have otherwise been done by one person, had the employee been adequately

skilled. This makes the overall system inefficient.

5. Finance

Many entrepreneurs in Bangladesh are still not skilled at managing their company’s financial aspects. They struggle with time and monetary management. To make things worse, most people are not respectful towards their fellow entrepreneurs in regards to their payments. Often we see the case where people deliberately delay payments. This hurts the recipient’s business. Due to inflation, delayed payments result in a decline in the value of money, adversely affecting the recipient in the process.

The problem of bad debts is prevalent in many countries and Bangladesh is no exception. The large portion of unrecoverable money that comes in the form of bad debts adversely affects the financial position of companies and hence creates big problems for the entrepreneurs.

My thoughts are meant not to discourage young budding entrepreneurs, but rather to prepare them for what to look for in their endeavors.

Having said all of these, I still believe we live in a land of opportunities and in such a big market spread over such a small geography, businesses, if done properly, are meant to excel.

This article was originally published in Boomerang Blog.

WRITTEN BY: LightCastle Analytics Wing

At LightCastle, we take a systemic and data-driven approach to create opportunities for growth and impact. We are an international management consulting firm which creates systemic and data-driven opportunities for growth and impact in emerging markets. By collaborating with development partners and leveraging the power of the private sector, we strive to boost economies, inspire businesses, and change lives at scale.

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