Securities regulator has taken a move to frame norms on venture capital to bring firms under discipline.
Presently, there are no rules and regulations for handling such types of risky and sensitive investment.
Over the past several years, venture capital companies that are relatively new in the country have been operating their businesses over the past few years without any rules.
This has mainly prompted the Bangladesh Securities and Exchange Commission (BSEC) to frame rules, said an official.
Venture capital companies usually provide fund at the early stages to private companies with high potential.
“The commission has formed a three-member committee to formulate rules on venture capital and private equity,” said BSEC in a statement yesterday. The committee was asked to submit report within a month to the commission, it said.
Currently, Bangladesh has very few such firms, including Brummer and Partners Asset Management (Bangladesh), NDB Capital, BD Ventures and VIPB Asset Management Company.
Industry people welcomed the regulator move saying it will help grow the industry and attract foreign investment.
They were of the view is that it was hardly possible to settle any dispute in the new business due to lack of rules.
Mohammad Al Maruf Khan, vice chairman of NDB Capital, said it is really tough to operate business in the unregulated market, as there is a chance of unethical activities.
“The move will help develop the sector as foreign investment was attracted in the disciplined market,” he said. “The move should be taken earlier. However it is better late than never.”
He said the regulation should follow the desirability in the perspective of Bangladesh market and avoid copy other countries.
An official of BD Ventures said rules will help build trust in the capital venture companies. “In absence of venture-capital fund rules, it is not possible to raise funds to finance new and innovative ventures.”
India has more than 200 such types of companies after promulgation of rules and regulations in 1996.
A large number of venture capital companies have been formed in Pakistan after proclaiming rules in 2001.
In India, venture capital financing started in 1988 with the formation of Technology Development and Information Company of India Ltd.
Grameen Fund is the pioneer of venture capital in the country.
It launched its operation in mid-1990s although the organisation is no more funding the private companies as venture capital.