Daily Update: UCB Announces Plans to Launch BDT 7bn Alternative Investment Funds

On 4th May, United Commercial Bank (UCB) announced that it plans to launch two alternative investment funds: a venture capital fund and a private equity fund of equal size BDT 3.5bn each totaling BDT 7bn, per TBS. 

Details: 

• The two funds will dedicatedly provide equity investment and funding support to talented young entrepreneurs. The venture capital fund will invest in the new entrepreneurs in seed rounds, followed by private equity investment that comes at the later stage of the companies. 
• The funds will be managed by UCB Alternative Investments, a planned alternative investment subsidiary of UCB. 
• The bank said it will invest Tk 1B in each of the funds — named as UCB Venture Capital Fund-One and UCB Private Equity Fund-One — as the sponsor and plans to raise the rest of the amount from local and international investors following approval from Bangladesh Bank and the Bangladesh Securities and Exchange Commission. 
• The investors in the funds will get their exits through the stock market listing of the invested firms or merger with another firm or selling shares to other investors. Professional fund managers will be in charge of selecting the recipients and providing them with guidance making sure the investors get their returns.

FS Perspective 

LankaBangla Securities Ltd, the top brokerage firm of Bangladesh, is among the early private sector players to launch an alternative investment fund with a target size of BDT 250 million. 

In 2020, IDLC, one of the top NBFIs, launched a venture capital fund with a target size of BDT 450 million. In March this year, Bangladesh Bank also announced the formation of the BDT 5bn startup fund. 

UCB is the first local commercial bank that has launched an alternative investment fund. The bank said it believes this initiative will add momentum to the startup investment ecosystem.

The startup ecosystem of Bangladesh has been receiving growing attention of late. However, access to funding has been a challenge for local founders. There is a shortage of active local venture capital funds. While international investors have been showing a growing interest in Bangladeshi startups, the attention is yet to produce significant results in the field. 

This scenario, however, has started to change of late — thanks to a plethora of Government and private sector initiatives and a bunch of high-quality startups attracting international attention. 

That being said, Bangladesh's startup ecosystem has a long way to go. Globally, Bangladesh’s startup ecosystem ranks 98, a far cry compared to our neighboring country India, which stands at 23rd in the global ranking of startup ecosystems. While UCB getting into space is likely to create new excitement, the country’s ecosystem needs more support.