Creation of Sustainable SME Entrepreneurship through Financing Fresh Graduates from Technical & Vocational Institutes

Fresh graduates from technical & vocational institutes face problems in finding a job and setting up an enterprise. In this backdrop, we propose a project which would facilitate getting formal finance to set up new SME and give advisory service for setting up and then running their enterprises.

About You

Organization: BRAC Bank Limited Visit websitemore ↓↑ hide↑ hide

About You

First Name

Syed

Last Name

Islam

Your Organization

BRAC Bank Limited

Country

Bangladesh, DHA

About Your Organization

Organization Name

BRAC Bank Limited

Organization Website

Organization Phone

+880-2-8836501 Ext-2071

Organization Address

1 Gulshan Avenue, Dhaka 1212

Organization Country

Bangladesh, DHA

Organization Type

Private Institution

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Your solution

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Name Your solution

Creation of Sustainable SME Entrepreneurship through Financing Fresh Graduates from Technical & Vocational Institutes

Describe Your Solution

Fresh graduates from technical & vocational institutes face problems in finding a job and setting up an enterprise. In this backdrop, we propose a project which would facilitate getting formal finance to set up new SME and give advisory service for setting up and then running their enterprises.

Country your work focuses on

Bangladesh, DHA

If multiple countries, please list them here. If your solution targets an entire region, please select it below

Whole Bangladesh

Region(s) your solution focuses on:

Range of turnover in your target firms, in USD

Less than $1 Million.

Average turnover in USD of your target firm

34,000

Number of employees in your target firms

Fewer than 5.

Average number of employees of your target firm

4

Specify the size, average and range of expected loans or investments in each target firm

Size: Average: $8,500; Range: between $5,000 to $14,000;

What stage is your solution in?

Idea phase

Innovation

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What makes your innovative solution unique?

Our proposition is unique because of our target market segment which is the fresh graduates from technical & vocational institutes (TVI). In Bangladesh, in 2009, total labor force was 53.7 million in which youth segment contributed to the largest portion (29.70% ). Currently, no formal finance is available for this segment in the market because they do not have previous track record in their respective trade though they have the required skills, ideas and potential to emerge as successful entrepreneurs.

In Bangladesh, there are about 1,473 numbers of institutes (both public and private) offering different tiers of technical & vocational education, to approx. 143,330 students which come predominantly from the youth segment. We will present our proposition/offer to the fresh graduates through the institutes (both public and private) and collect applications from them along with their business ideas. We will then scrutinize each applicant’s case and make decision on financing their new enterprises.

Once an entrepreneur is selected then we will finance them and will also advise them on the following:

(i) how to set up new ventures
(ii) how to maintain Banking relationships
(iii) how to market products
(iv) how to operate a successful business

In summary, the unique features of our idea are-

• Provide access to finance to a potential segment of the market where currently no formal finance is available.
• Develop successful & sustainable new SMEs through financing and through advisory services.
• Employment generation through the new SMEs

How does your proposed innovation leverage public intervention in catalyzing private SME finance?

In Bangladesh, in 2009, total labour force was 53.7 million in which youth segment contributed to the largest portion (29.70%). Hence, if any intervention aimed at creating employment opportunity for the youth would obviously act in significantly improving the unemployment situation in Bangladesh. As a general observation, the fresh graduates from technical & vocational institutes (TVI) face problems in finding a job and setting up an enterprise. This is because the scope for employment is limited and the new graduates face difficulty in getting the access to formal finance since they do not have previous track record in their respective trade. In this backdrop, our proposed innovation will facilitate the fresh graduates in getting formal finance to set up SME enterprises and will also provide advisory service for setting up and then running their enterprises. This is how sustainable SME entrepreneurship would be developed in a much greater in Bangladesh.

What barriers does your proposed solution address?

Lack of collateral, Lack of financial capacity, Unavailability of financial products tailored to SME needs.

If you checked any of these barriers, describe how your solution addresses them

The target segment of our proposed solution consists of the fresh graduates from technical & vocational institutes (TVI). These fresh graduates are skilled in their respective areas but do not have sufficient business experience/knowledge or collaterals to become eligible for financing from Banks.

1. Lack of collateral: In our proposed solution no collateral will be required for fresh graduates from technical & vocational institutes (TVI) to become eligible for our financing. All they need to become eligible for our financing is to have a sustainable/profitable business ideas which our team will scrutinize to determine their eligibility for getting finance.

2. Lack of Financial Capacity: The businesses of our target segment are in incubation stage. So, they will not have any financial capacity. But we will still finance them through thorough analysis of the proposed business ideas along with 3 years' business projections.

3. Unavailability of financial products tailored to SME needs: Currently there are absolutely no products in the market to cater this particular segment of fresh graduates. Our proposed solution will offer a complete package which will include the following:

(i) Screening of Ideas
(ii) Preparation of business plan/projection
(iii) Financing
(iv)Provide business start-up toolkit
(v) Review of business progress on a monthly basis

Impact

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Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

Bangladesh a labor intensive country is renowned for her hardworking and technically skilled workforce. There are about 1,473 numbers of institutes (both public and private) offering different tiers of technical & vocational education, to approximately 143,330 students every year.

To establish sustainable Small & Medium Entrepreneurship, we will finance eligible graduates from Technical & Vocational Institute(TVI). Traditionally fresher’s with a dedication to learn and work in industry which requires technical skill get admit in these institutes. And these institutions follow such a curriculum which lays the foundation knowledge and equip them with technical skill through class room based and industrial training.

An emerging economy like ours need a lot of technically skilled people. Sectors like light engineering , leather technology, dentistry, mechanical engineering, civil engineering, textile engineering are on dearth of this workforce. To cater this segment and simultaneously build a sustainable Small & Medium Entrepreneurship society we will finance startup, growing and matured businesses. We will create a dedicated cell for this segment which will include conventional and tailored product and skilled human resources. We will also establish an advisory council that will identify bottlenecks of the business/business plan and advise remedy. Which in turn will work as a nucleus for this sector.

After completion of graduation from a TVI, a graduate solicit a job first. After working for several years then he/she starts his own venture. This has been going around as none came up with an initiative to help them start their own venture after graduation. We intend to do so because we believe that with a proper banking orientation these skilled workforce can establish their own business with the help of a bank. Now a days, Bangladeshi entrepreneurs are exporting skilled nurses to developed countries after meet domestic demand. So there is a large opportunity to propel the economy by financing this sector which has immense potential.

How many firms do you expect to reach?

We intend to reach 100 firms

What is the volume of private SME finance you aim to catalyze?

Our total exposure in first year will be BDT 50 million. Whereas BDT 5,00,000 will be per firm exposure.

What time frame will be required to reach these targets?

Two Months

Does your solution seek to have an impact on public policy?

Yes

What would prevent your solution from being a success?

An emerging economy like ours has some inherent hurdles. Like starting a business, accuracy of information, trade union, lack of market monitoring by authorities. Apart from these, factors of market risk, government tax shelter, technological knowhow, government incentive and business risk involves.

A fresh graduate (including growing businesses) with a new venture will face above mentioned hurdles but with our help these can be overcome in a short span.

Describe the social impact of your innovation. Please include both numbers and stories as evidence of this impact

This program will create an impulse to the Bangladesh economy. By financing this segment, entrepreneurs will be able to meet local demand which currently met by import. Things like employment generation, enhancement of per capital income, and augmenting demand for other sectors will be the achievement. Bangladesh is blessed with a large population which means a large domestic market to cater. This large aggregate demand will be meet by these segment. For instance, currently approximately 143,330 students are studding in TVI. Among them if we select 100 person ( 100 projects) out of 300 after rigid scrutiny for financing. We will then generate 1000 employment (10 per business) with an annual turnover over BDT 10 million. This improve living standard of 1000 families. This just a small demonstration. The actual impact will be many fold.

Sustainability

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List all the funding sources that are required for the sustainability of this solution

(i) Donor through Bangladesh Bank (Central Bank of Bnagladesh)
(ii) Government through Bangladesh Bank (Central Bank of Bnagladesh)
(iii)Bank

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

The participating banks will be able to completely repay the fund taken from Bangladesh Bank in the process of repayment by the borrowers. The crucial point here is selection of right entrepreneurs, projects, and proper guidance to the borrowers to make them self reliant by the bank.

In our estimate, it will taske approximately four years for the project to be independent from public finance.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

Each of the participating private banks who will supply approximately 20% of the invested fund is basically the largest private funding source for the project. In our estimate, there will be around 30 participating private banks for this project. So, if there is loss to any one or few of the private banks, the overall project will not be hampered. Moreover, Bangladesh Bank will have the rein of the project. So, any financial loss of the private banks will be quickly recouped by the Bangladesh Bank as well.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

Firstly, the partnership between the TVIs and the participating private banks is crucial in that there should be understanding between these two parties regarding what kinds of trades are viable from business point of view in a particular region and at a particular time. In this case, there should frequent transfer of business insights from the participating banks to the TVIs.

Secondly, the partnership and understanding between regulatory authority and the participating private banks is very important in that regulatory authority would not only provide the largest chunk of financing but also take the leadership role of institutionalizing the project from legal and formal point of view. The regulatory authority represented by the Bangladesh Bank would create this project through circulars, and amend or extend time to time the rules and regulations needed to better serve the vision of the project.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

Firstly, participating banks will perform necessary due diligence before disbursing loan. But, since the loans would be disbursed as collateral free there is always risk that credit would go bad since default cultural has deep rooted base in our minds. Secondly, gender disparity in entrepreneurship has been a fact in our society for long. Despite our effort to upscale entrepreneurship in a gender balanced way, prevalent reality in society might pose threat for the successful development of the enterprises led by women. Thirdly, banks are supposed to play advisory role to the borrowers, but there might be cases that banks might lack the adequate capacity to play that role.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

Firstly, with a potential market of about 150,000 graduates, the entrepreneurship to be developed through implementing this project would primarily help in creating small and cottage manufacturing units and eventually medium enterprises. If theses cottage and SMEs are properly guided by competent advisors they may boost the manufacturing sector of the country which is currently 29.50% of GDP, through providing backward linkage of the same.

Secondly, with the growth of the SME and manufacturing sectors of the country, service sectors which is the biggest one counting 49.90% of GDP would be boosted up through increased effective demand in the SME sector.

Since, the TVIs are spread all over the country and we planning to cover graduates from all TVIs to keep a regional balance, this project would scale up the economy across the geography of the country under the assumption that the graduates would set up their enterprises around the command area of the TVIs.

188 weeks ago Syed Islam updated this Competition Entry.
188 weeks ago Syed Islam updated this Competition Entry.
190 weeks ago Syed Islam submitted this idea.