The way our ICT sector is thriving, the day is not far off when it will grow into one of the biggest forex earners for Bangladesh -- as evidenced by its continuous running on a hot streak with continued inflows of foreign currency. What is more, this potential sector has also created a local market of Tk45,000-50,000 crore.
In this digital journey of nearly two decades, this is truly a great achievement. And I believe there is much more potential waiting to be unlocked. But what has now got in the way is a lack of adequate venture capital support -- this is a major challenge that our young entrepreneurs are currently grappling with.
Young entrepreneurs worldwide get capital support from two main sources -- angel investors and easy loans from banks and governments. Unfortunately, both are lacking in our country.
In this scenario, ICT entrepreneurs are struggling to advance their businesses. Therefore, there is no alternative but to provide them with investment support, with a view to boosting this sector’s growth as expected. As the culture of angel investment has not fully developed in our country yet, policymakers could encourage banks to provide easy loans to ICT entrepreneurs.
Since the announcement of Digital Bangladesh by the prime minister in 2008, there has been significant infrastructure development in the ICT sector, leading to the proliferation of various digital services as well as a massive growth in ICT business. From a mere $26 million in 2008, this sector now earns nearly $1.5 billion in foreign currency annually. The workforce, which was once 50,000 people, has now exceeded 2 million. Considering these factors, it is evident that the ICT sector is now one of the country’s prime sectors to take our economy forward.
This sector could play a significant role in bringing in foreign currency, much like the readymade garment or pharmaceutical industries. To achieve this, we need to address the financial concerns of our young entrepreneurs. And that can only be possible through certain policy decisions.
The Bangladesh Bank has already set up funds to provide some sectors with incentives. We hope that a special fund could be created for the ICT sector as well -- it can be Tk100 crore or more. Then private banks could also provide significant support to ICT entrepreneurs from that fund.
If the tax holiday is lifted, the dream of establishing Bangladesh as a hub in the ICT sector will be shattered
For this, banks need to be instructed to provide loans to these entrepreneurs without collateral based solely on credit ratings. Because most of them do not have the kind of collateral that is usually required. It must also be ensured that the interest on these loans remains within a single digit.
In this regard, I believe that two things can play a significant role -- digital bank and BASIS. Soon after digital bank, as planned by the Bangladesh bank, launches its operation, young entrepreneurs in the ICT sector can avail loans without collateral and at a single-digit interest rate. With services like Nagad digital bank progressing so rapidly, in the coming days, entrepreneurs will be able to get loans at a low interest rate based solely on credit ratings, with just a few clicks on their phones.
The digital bank will have lower operating expenses than traditional ones as it will not have physical infrastructure. The bank will rely more heavily on technology to provide customers with a plethora of services, which will eventually translate into lower charges and interest rates for customers. The digital bank will provide its services based on customers’ financial footprint. A customer’s creditworthiness will be assessed using an AI-based credit rating system, requiring no collateral.
BASIS or Bangladesh Association of Software and Information Services can also play a significant role in ensuring capital support for entrepreneurs. This large organization in ICT needs to negotiate with policymakers at any cost to provide financial benefits to entrepreneurs. BASIS elections will be held in a few days. If this venture capital related issue can be resolved by the new leadership of BASIS, then we can allow ourselves to imagine making the ICT sector a truly large industry.
Moreover, to further advance this sector, I believe that the tax holiday, which is scheduled to end in the next two months, should be extended at least until 2041. If the tax holiday is lifted, the dream of establishing Bangladesh as a hub in the ICT sector will be shattered. Because business costs will increase significantly, causing our local businesses to fall behind in competition -- that is for sure. So, I -- along with many aspiring and new entrepreneurs -- implore that the government continue the tax break.
Niaz Morshed Elite is an ICT entrepreneur and executive director at Nagad Ltd.