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    Betting on Entrepreneurship to Transform Bangladesh

    LightCastle Analytics Wing

    Bangladesh has positioned itself as a leading frontier market with a population of 168 million (BBS) – 8th largest in the world and 5th in terms of density. And on top of that 50% of the population is below the age of 35 with 500 thousand fresh graduates entering the market each year (Bangladesh IT/ITeS Industry Development Strategy – LICT).

    It’s unfortunate, however, to note that the economics of supply and demand in regards to employment aren’t matching. According to a study of Bangladesh Bureau of Statistics (BBS), as many as 400,000 youths with university degrees are now unemployed. This has left around 4.37 percent (BBS) of the total labor workforce, roaming from one place to another looking for work. This huge untapped human capital can be converted to assets by promoting entrepreneurship and inclusive ventures.

    According to Social Progress Imperative (SPI), Bangladesh in comparison to its peers produced a ‘development surprise’ in the SAARC region, ranking 99 among 132 countries — a relatively strong performance when compared with Nepal (101), India (102) and Pakistan (124). The World Bank measured Bangladesh’s GINI Coefficient at 32 percent (higher than less industrialized countries such as Albania, Niger, and Serbia) and the country was ranked 111 out of 148 countries on the Gender Inequality Index in 2012. Currently, the country has USD 30 billion+ in foreign reserves, USD 210 billion in yearly GDP value and with USD 1,350 per capita income just entered the lower ranks of a middle income nation. While social and economic indicators are moving in the right direction, the growth is far from inclusive.

    Bangladesh has received over 52 billion USD in aid over the past 45 years[1] but the public system is not geared to utilize all the funds, resulting in a reduction of the annual development plan (ADP) by almost 20 percent every year[2]. While development giants like BRAC, Grameen Bank, ASA as well as over 26,000 smaller NGOs and 1000+ microfinance institutions with their unprecedented efforts is helping Bangladesh achieve equitable growth – we need sustainable business ventures to keep up the momentum.

    Entrepreneurship as a gateway to sustainability: Give a man a fish, you feed him a meal; teach a man fishing, you feed the whole village. Entrepreneurship development is becoming increasingly important because it creates a lot of impact on the locality and changes the lives of the people. Previously, businesses were all about profit but now enterprises are working towards becoming inclusive, where they care about people, planet and profit.

    Big economies like that of India has launched initiatives like Startup India through the Government to attract more entrepreneurs to start their own businesses, and Make in India to attract foreign companies and direct their FDIs into these heavy industries. Any business – big or small – will contribute to the society because it not only makes money for itself, but also provides jobs, creates export opportunities, distributes wealth and elevates the living standards of the whole community.

    Bangladesh was lagging behind SME development only a couple of years back, but now new initiatives are trying to enable entrepreneurship through various accelerator/incubator programs and impact investments around different parts of the country. These incubator/accelerator programs and impact investments are giving local SMEs an opportunity to build inclusive ventures and create employment opportunities. The programs are helping SMEs scale by providing financial support along with gaining market linkages such as introducing them to corporate buyers, foreign investors, logistical support and educating them on how to run a sustainable business for the long run.

    For a sustainable Startup/SME ecosystem, it is vital to facilitate entrepreneurs by providing business capacity building and access to finance. From the year of 2013, both public and private sector stakeholders are focusing on building the ecosystem. Government, local conglomerates and MNCs have been quite active in running such initiatives. In an effort to promote the startup scene, the government launched STARTUP BANGLADESH, which also has provisions for VC investments; Grameenphone, Bangladesh’s largest telecommunications company launched GP Accelerator focusing on corporate technology startups; SD Asia, a local start up incubator launched STARTUP DHAKA focusing on tech based startups; LightCastle Partners launched SMARTCAP & Unnoty business accelerator programs with provisions of receiving impact investments to facilitate Ag-SMEs and entrepreneurs.

    Case in Point: The Momita Enterprise Story

    The couple Mr. Md Delowar Hossain and Mrs. Momita Hossain have turned the tables in the flower cultivation sector by their venture “MOMITA FLOWER PRODUCTS” by participating in a business acceleration program. The accelerator program was jointly facilitated by Truvalu.enterprises and LightCastle Partners. From a small flower producer, they have now turned into a fairly large firm. Not only have they increased their production and sales by 50% but also created working opportunity for others.

    Currently Momita Enterprise have around 50 employees, who are directly working in the flower processing unit and a further 20-25 part time workers who are working in ancillary functions like packaging and logistics. At present, Momita Enterprise is working on developing own logistics support to ensure uninterrupted supply of flower products in the domestic market. Currently, they are focusing on signing up distributors in the divisional cities.

    Can you imagine what Bangladesh would look like if we had more successful stories like Momita? And what it takes is really not complex. Just the right set of tools and capital can bring about wonders in the lives of so many small businesses all over the country. Not only will wealth be distributed more equitably, but also additional employment opportunities will get created.

    By witnessing success stories like the above, alternative investment firms – alongside financial institutions – have also entered the market to capitalize on the growing opportunities. Some notable examples include: Venture Investment Partners Bangladesh (VIPB), Truvalu.enterprises, Maslin Capital and BD Ventures. There are at least 15 impact investors currently active in Bangladesh with a total of USD 955 million in deployed capital, of which USD 834 million has been deployed by DFIs. Beyond these impact investors, at least 14 impact-related investors have current investments in Bangladesh of about USD 744 million (source: GIIN).

    The new era of entrepreneurial revolution has begun – fueled by entrepreneurship development programs. However, to make a sustainable business ecosystem we will need startup/SME friendly policies, easy access to funds/alternative investment ecosystem, education system which promotes entrepreneurial spirit, less bureaucratic administrative processes and finally social and cultural support to remove the stigma and fear of becoming an entrepreneur. If these challenges are overcome, SMEs and startups can make significant contributions to the growth of the economy and solve our jobless growth conundrum.

    This article was written by Md. Shabbir Nowsher, a Senior Business Consultant at LightCastle Partners and co-authored by Omar Farhan Khan, Business Consultant at LightCastle Partners.

    This has been published as part of LightCastle’s 6th year anniversary publication, “LightCastle Featured Insights 2019“.

    References

    • 1. Uddin, Shamsu (2016), “The Impact of Aid on Economic Growth of Bangladesh: A Review”,
      Thoughts on Economics, Vol. 25, Issue 3 & 4 | December 2016. Retrieved from: https://www.ierb-bd.org/thoughts-on-economics-vol-25/
    • 2. Uddin, Shamsu (2016), “The Impact of Aid on Economic Growth of Bangladesh: A Review”,
      Thoughts on Economics, Vol. 25, Issue 3 & 4 | December 2016. Retrieved from: https://www.ierb-bd.org/thoughts-on-economics-vol-25/

    LightCastle Analytics Wing is the research division of LightCastle Partners. It is tasked with producing periodic reports on the different sectors of the economy, analyzing trends in markets and making methodical, thorough and intelligent analysis to improve strategy and drive business growth.