Bangladesh's US$ 250million software industry can fetch billions of dollars, but, say entrepreneurs, policies run counter to their plans or potential.
Last fiscal, the country's software exporters earned little over US$ 45 million, a paltry sum compared to their real strength because both banks and the local capital market treat them as "traditional businesses".
"To raise finance from capital market, the minimum paid-up capital needed is Tk 400 million," says Mohammad Rafiqul Islam Rowly, a software exporter and a former president of BASIS or Bangladesh Association of Software and Information Service.
"But no software company in Bangladesh has that level of capital base," said Rowly, who runs CSL Software Resource Ltd.
Rowly and many in the business lament that they cannot pay for research and development (R&D), the crucial element for developing software products. And it is beyond the banking system to come to their rescue.
"Banks cannot finance the software industry because this industry mainly uses human resource as capital and doesn't really possess any tangible assets," says Mahmood Osman Imam, who teaches at the Department of Finance at Dhaka University.
"The banks need collateral or securities."
Rowly points out that "Dhaka is now ranked third among global cities where online jobs are outsourced from the West" and employs nearly 30,000 professionals in Bangladesh.
"If minimum capital investment requirement is reduced to Tk 40 to 50 million," says Rowly, "I believe five software companies will immediately go to the capital market to raise capital."
Fahim Mashroor, a BASIS vice president, insists that the paid-up capital requirement be brought down to Tk 10 million. "I can tell you this will result in 50 companies going for IPOs in 2-3 years."
Rowly, however, suggests gradual reduction in the requirement.
Mahmood Osman Imam, an academic, agrees with the argument for a reduced capital requirement but not as low as Tk 10 million.
"In other countries, the capital market treats the software industry differently and we should also relax the rules," Imam says. "But we must make a proper plan before that."
There is every case for the software industry to get the support they require, he says.
Information Communication Technology (ICT) and IT-Enabled Services (ITeS) are among the fastest growing sectors in Bangladesh, but banks argue that they have problems with equity valuation of such companies.
The central bank has been working with BASIS to find a solution, says governor Atiur Rahman.
"I have said the software companies can be financed by our EEF (equity entrepreneurship fund). BASIS has been entrusted with the responsibility to come up with a plan for that," he said.
BASIS president Mahboob Zaman said a proposal on alternate financing arrangements like venture capital will be given to Bangladesh Bank within December.
"There are some banking rules that we can't overwrite," he added, explaining why BASIS was looking for alternate financing.
Last fiscal, the country's software exporters earned little over US$ 45 million, a paltry sum compared to their real strength because both banks and the local capital market treat them as "traditional businesses".
"To raise finance from capital market, the minimum paid-up capital needed is Tk 400 million," says Mohammad Rafiqul Islam Rowly, a software exporter and a former president of BASIS or Bangladesh Association of Software and Information Service.
"But no software company in Bangladesh has that level of capital base," said Rowly, who runs CSL Software Resource Ltd.
Rowly and many in the business lament that they cannot pay for research and development (R&D), the crucial element for developing software products. And it is beyond the banking system to come to their rescue.
"Banks cannot finance the software industry because this industry mainly uses human resource as capital and doesn't really possess any tangible assets," says Mahmood Osman Imam, who teaches at the Department of Finance at Dhaka University.
"The banks need collateral or securities."
Rowly points out that "Dhaka is now ranked third among global cities where online jobs are outsourced from the West" and employs nearly 30,000 professionals in Bangladesh.
"If minimum capital investment requirement is reduced to Tk 40 to 50 million," says Rowly, "I believe five software companies will immediately go to the capital market to raise capital."
Fahim Mashroor, a BASIS vice president, insists that the paid-up capital requirement be brought down to Tk 10 million. "I can tell you this will result in 50 companies going for IPOs in 2-3 years."
Rowly, however, suggests gradual reduction in the requirement.
Mahmood Osman Imam, an academic, agrees with the argument for a reduced capital requirement but not as low as Tk 10 million.
"In other countries, the capital market treats the software industry differently and we should also relax the rules," Imam says. "But we must make a proper plan before that."
There is every case for the software industry to get the support they require, he says.
Information Communication Technology (ICT) and IT-Enabled Services (ITeS) are among the fastest growing sectors in Bangladesh, but banks argue that they have problems with equity valuation of such companies.
The central bank has been working with BASIS to find a solution, says governor Atiur Rahman.
"I have said the software companies can be financed by our EEF (equity entrepreneurship fund). BASIS has been entrusted with the responsibility to come up with a plan for that," he said.
BASIS president Mahboob Zaman said a proposal on alternate financing arrangements like venture capital will be given to Bangladesh Bank within December.
"There are some banking rules that we can't overwrite," he added, explaining why BASIS was looking for alternate financing.
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