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Equity and Entrepreneurship

Fund (EEF)
Major Challenges in existing scheme and some thoughts based on
realities

The Bangladesh Financial Markets


Course Code : D101

Prepared for :

Faysal Ahmad Khan


Lecturer

Prepared by :
Md. Mahfuzul Haque

201601-002

Md. Redoanul Haque Dolon


2016-01-009
Md. Shariqul Anam

2016-01014

Batch 4
Md. Nazmul
Islam
2016-01-019
Post Graduate Diploma
in Capital
Market

Bangladesh Institute of Capital


Market

Introduction
Formed in 2000-01

Equity Development
Fund
Bangladesh
Bank

Equity and Entrepreneurship


Fund
Investment Corporation of
Bangladesh

BDT 1 Billion (100 Crore)


Equity not Credit, Loan or Advance
Equity holding
51%

Two sectors : EEF Agro and EEF IT

49%

Vision
Creating new entrepreneurs in promising but somewhat risky agrobased, food processing and ICT sectors and encouraging
investments in such sectors by unemployed young, educated and
energetic individuals.
Contributing to employment generation and socioeconomic
improvement and GDP growth of the country is the Vision of the
EEF Scheme.
Ensuring a double bottom line returns" that seeks social returns in
addition to financial returns and GDP growth through encouraging
successful investments in thrust (Core) sectors, is the
Government's main goal.

Mission
Fostering decentralization of the economy
Capital Formation through extending financial support in promising but somewhat
risky new projects
To create opportunities for the promising young, educated, skilled and low-income
people to participate in the value-added chain through commencing corporate form of
business and thereby play an important role in increasing the Governments Revenue;
Assisting fisheries and dairy-based and processing projects of such products to meet
the nutrition needs
To develop Infrastructures in rural and under-privileged areas & ensure optimum use
of fallow land;
To meet the domestic demand as well as increase the net export value
To promote woman entrepreneurs
To diverse services to stay relevant in tomorrow's Bangladesh.

Purpose of the Study


The broad objective is
To carry out a review of the operations of EEF to assess the investment
facilitated in agro based and ICT industries under EEF Scheme
Success in launching production and continuing with production activities
Contribution of EEF Scheme including production performance projects
employment generation
Factors affecting performance of EEF supported projects
Major Challenges in existing scheme and some thoughts regarding its
prospective Corporate Structure
Management Process and Funding model based on realities.

Methodology of Study
Basically descriptive and Quantitative in nature.
Some relevant data and available information has been collected regarding legal status,
financing model and exit strategy through ICB.
The participants of this group visited ICB and consulted with their executives through
face-to-face discussion and shared some experience, ideas, beliefs and values as well.
Primary data and information from the various desks of the EEF unit of ICB and
Bangladesh
Secondary information was taken from the Official websites of Bangladesh Bank and
ICB.
Quantitative data were collected & consolidated from the audited financial statements
on EEF operations since the Scheme's inception in 2000-2001 till April 2016 to establish
data trend, take a look at the cause and effects and establish relations among them.
The report reveals data relating to Sanction, Disbursement, Buy-back and
Implementation Status of EEF projects, since inception of the Scheme.

Limitations of The Study


The report has been furnished mainly on the concept
gained through internet based learning about venture
capital financing for which further guidance from
government/policy makers is most essential;
The major recommendations concluded in this report
are based on some assumptions for which approval
from the highest authority of the Government is, of
course, the prime concern for us.
Time was really critical factor for us to accomplish this
report.

Background and an overview


of the Existing Scheme

Background
To encourage the investment in potential Agro-based
and ICT, Government of Bangladesh set up an Equity
Development Fund (EDF) through budget allocation of
2000-01.
In 1 June 2009 administration of EEF has been
transferred to ICB through a sub agency agreement for
a term of ten years.

Major Stakeholders
1. GOB participates as an equity partner of the private entrepreneurs.
2. Bangladesh Bank acts as an agent of the gob to frame policies, manages
the fund of EEF, monitor performance of ICB & reports to the gob regarding
fund utilization.
3. ICB does the operational management of the fund including:

Short listing of EOI applications

Verification of project profile

Approval of sanction and disbursement

Conduct share buy-back related activities as a sub-agent of BB.

4. Lien/participating banks evaluate projects following a physical verification


of the project site, enters into an investment agreement with the
entrepreneurs and disburses the installment cheques favoring entrepreneurs.

Application and sanction


process
Submission of EOI of the project to Bangladesh Bank
Registration in the Registrar Of Joint Stock Companies
And Firms(RJSC)
Short listing of the entrepreneurs through interview
Submission of appraisal report
Approval of the project appraisal committee (PAC)
Sanction letter is issued with the approval of Sanction
Board
Currently
PACEEF.
and Sanction Board for EEF both comprises of 9 members from
for
BB, ICB MOF & Agricultural Expert.

Disbursement process
EFF assistance is disbursed after fulfillment of the conditions
mentioned in the sanction letter at the following ways:
49% of the project cost is disbursed in three installments like 50%, 30%
and 20% respectively, after fulfillment of the conditions and 51% of the
sanctioned project cost invested by the entrepreneur

Share Buy-back process

In the first three years shares can be bought-back at the face value. After 3 rd
year shares can be bought-back at the face value or break-up value whichever
is higher. The shares have to be bought back as per the following schedule
after the disbursement of first installment:
4th Year after 1st
Installment
Agro
20%
ICT
10%

5th
Year
20%
15%

6th Year 7th Year


20%
25%

20%
25%

8th
Year
20%
25%

Cumulative position of EEF sanctions,


disbursement and recovery up to 30 April 2016.
Sanction
Particul
ars

Disbursement

Recovery

No. of
project

Amount

No. of
project

Amount

No. of
project

Amount

Agro

1728

3,149.44

729

1,166.27

143

185.54

ICT

116

174.92

80

97.85

26

17.35

Total

1844

3,324.37

809

1,264.12

169

202.89

Sanctioned A mount in ICT Projects


Disbursed A mount in ICT Projects

6%

Recovered A mount in ICT Projects

34%
60%

Graphical representation of sanctioned, disbursed


and recovered amount of Agro Projects.

Graphical representation of sanctioned, disbursed


and recovered amount of ICT Projects.

Social Aspect
Study Reports
SWOT Analysis

Social Aspect
EEF Scheme contributes to double bottom line returns
to generating a market rate of return on invested capital
it also looks for social, environmental and economic impact to
the communities

Ensuring Optimum Utilization of Land


Employment Generation
Around 1600 projects have given approved
Around 700 projects have been implemented
Employment opportunity has been created for 36,651 (Approx.)

Social Aspect
Reduced poverty
communities

and

increased

the

tax

base

of

the

The Successfully implemented companies have been running profitably and


creating wealth for respective entrepreneurs, employees, suppliers, customers
and other stakeholders

Priority in Women empowerment, freedom fighters and nonresident Bangladeshis


Infrastructural Developments
Under the EEF agro sector financial assistance in the form of equity is made to
hatchery and fish culture, milk production, biogas production, poultry hatchery,
feed mill, mixed fertilizer, meat processing, auto rice mill, specialized cold
storage, tissue culture, crocodile and turtle culture, etc. projects.

Social Aspect
Digital Bangladesh
EEF ICT sector is given utmost priority so that it can play
significant role in software development and communication
sector

Increasing the source of protein and minerals

Study Reports
Study Reports on the activities of EEF
A total of 04 studies were carried out so far on the activities of
EEF since inception
Implementation Monitoring and Evaluation Division (IMED) of
the Ministry of Planning carried out an evaluation of the
projects funded under the EEF in 2006
A further review of the activities of EEF was carried out by a
team of Bangladesh Bank officials in 2009

Study Reports
Major Findings in those Study Reports
One of the main objectives of EEF is to facilitate investment in
diverse agro based and ICT industries
objective has been largely met
The studies identified problems relating to delayed EEF
disbursement, shortage of working capital and weak
monitoring as the main reasons behind implementation delays
Less than satisfactory outcome in ICT

SWOT ANALYSIS
Strengths: (Potentially Positive Internal Factors)
ICB has 39 years of extensive experience and reputation in
developing entrepreneurial leadership
ICB has a strong IT division with skilled IT professionals who
are capable of providing IT solutions and services
Combination of technical knowhow, expertise and experience
in Project Appraisal Committee (PAC) and Sanction Board
Huge clientele base has been showing their interest in
establishing innovative Ventures throughout the country

SWOT ANALYSIS
Weaknesses:
Factors)

(Potentially

Negative

Internal

Technologies in new types of projects are not well known


Competitors can offer similar products quickly at low cost.
Only low capital private ventures will be covered for financing.
Will take part ownership in the proposed ventures having
limited/no participation in managing the venture.
High Transportation costs.
Opportunity costs.

SWOT ANALYSIS
Opportunities:
Factors)

(Potentially

Positive

External

Optimum mobilization of resources like land, labor, capital,


technology and organization will reduce Import cost that may
save a huge amount of foreign currency.
The unemployment problems will be solved to a great extent.
The proposed business falls in the priority sector development.
The Entrepreneurs will get an opportunity to learn about the
corporate form of Businesses.

SWOT ANALYSIS
Threats: (potentially negative external factors)
Possibilities of discontinuation of Govt. funding.
Increase of EOI Applications.
Enforcement has been challenging due to Lack of structured legal
framework.
Entrepreneurs Profit hiding tendency to avoid taxes and profit sharing
with the minorities.
Lack of practice in corporate culture and demonstrated negligence in
maintain proper records in accordance with GAAP.
Rapid changes in business environment and frequent changes in rules
and regulations can impact the business.
Server crashing and hacking possibilities.