Academic journal article ASBM Journal of Management

Entrepreneurship Development in Bangladesh: The Role of Commercial Banks

Academic journal article ASBM Journal of Management

Entrepreneurship Development in Bangladesh: The Role of Commercial Banks

Article excerpt

Introduction

Entrepreneurship is the capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the starting of new businesses. In economics, entrepreneurship combining with land, labor, natural resources and capital can produce profit. Entrepreneurial spirit is characterized by innovation and risk-taking. Entrepreneurship development is playing a vital role in employment generation, GDP (gross d o me s ti c pr o d u ct ) form at ion, e x p o r t d eve l o p me n t , e t c . For e n t re p r e n eur s h i p development, most of the entrepreneurs resort to supports and resources from 'outsiders' such as other firms (Meller & Marfan, 1981; Visser, 1997), supporting institutions (Allesch, 1993; Gibb, 1993; Lim, 1994; Gibb & Zoltan, 1996; Sarder et al, 1997), and relatives and friends (Birley, 1985; Johannisson, 1988; Bridge et al, 1998). Commercial banks are the financial supporting institutions for the small and medium enterprises (SMEs). Most commercial banks, among others, provide bank finance (loan or credit services) to customers. A bank can extend credit to an entrepreneur, which allows him or her to be able to start with more purchasing power than with his or her cash alone.

BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited), a public commercial bank, came into operation on 21 January, 1989. It was established with a vision to extend financial support for the hundreds or thousands of small and cottage industries of the country. BRAC Bank Limited, a leading private commercial bank in Bangladesh, has received the commercial banking license from Bangladesh Bank in 2001. Since then it has established its name and branding with its quality of service and products. In a very short time BRAC Bank became one of the successful and fastest growing private banks in Bangladesh.

Entrepreneurship development is determined by different agencies or individuals by different factors or components. In Bangladesh, in their studies, Alam (1998) and Rahman (1999) identified the determinants of entrepreneurship development in terms of basic five components. These components are (i) innovation (introducing or adding new products to existing business); (ii) expansion of business (increase in the amount of the entrepreneurs' equity capital); (iii) new line of business (starting a different line of business); (iv) employment generation (increase in the number of employees); and (v) technological change (change in production process or techniques with purchase of new machineries and improvement in the quality of existing goods or services). Technological improvement is applicable for manufacturing enterprises only. In the present study, in assessing the impact of bank finance on entrepreneurship development, these five components were taken into account. Intensity of bank finance means the amount of loan an enterprise received from the commercial banks. Low intensive bank finance implies the amount of loan below Tk. 1 million, while high intensive bank finance is the amount of loan of Tk. 1 million or above. Type of bank finance, in the present study, indicates the type of bank as the source of finance (public or private). An enterprise is said to be small if its fixed assets excluding land and building and number of employees do not exceed Tk. 15 million and 50 respectively (Bangladesh Bank Circular 2008).

While different government organizations, Non Government Organizations (NGOs), banks, nonbank financial institutions, training and developmen t i ns t itutio ns, e duca t i onal institutions, trade associations have been engaging a number of programs and policies to develop entrepreneurship in the country, Bangladesh is still on the list of the developing countries in the world with unemployment level rising alarmingly. It is, therefore, necessary at this junction to undertake an assessment of the effects of these programs-financial and non-financial on entrepreneurship development in Bangladesh. …

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