Report on Entrepreneurial Challenges

[1] The last two phases in timeline can overlap each other bearing a total time frame of 10 -12 weeks.

Critical Analysis of Fornix Soft’s Performance in growth:

As one of the pioneers of Bangladeshi multimedia software arena, Fornix Softs growth is admirable. Unlike all other IT companies, Fornix Software’s growth was very rapid in the early years. From 1998 to 2000 it has achieved nearly the top spot in Bangladeshi retail software industry. But from 2000 it has changed its business process somewhat. By expanding its services horizon, Fornix decided to enter the international outsourcing market. Heavy structural changes and improvements followed.

The effect of the change in business strategy is yet to be seen. As the new quota less market shows startling promise ahead, the lack of proper support in the sector also poses a problem. The company never suffered difficulties in repayment of its loans while growing. All predictions points to a steady growth in near future.

Fornix can be termed as a small enterprise as not having employees over 100 persons. But in Bangladeshi ICT industry context it is a considerable achievement, as most of the outsourcing and programming/data entry jobs are handled by part timers in adhoc pay per work basis. Fornix took a bold step in not outsourcing its gathered jobs outside the firm to other local IT companies but attempt to provide total service in house.

Although Fornix’s admirable business strategy, in Bangladeshi context, where market does not always react to positive inputs, it remains also to be seen, how much the company can forward itself in the coming years.

A look in ICT entrepreneurial sector:
Problems, prospects and recommendations

Problems in financing for Bangladesh ICT SMEs:
Software industry is one of the essential components of IT industry with global market of US $ 276 billion in 1996. It is still largely dependent on human resources and some of the developing countries are taking advantage of this opportunity. India is one of the most successful countries in developing its software industry and in 1996, it generated revenues totaling US $ 3.20 billion (out of which export was around 40%), with an annual growth rate of about 70%.
The present size of software industry in Bangladesh is very small. Only a few firms are involved in export of software and data entry services, and the total volume of revenue generated is negligible. These factors can be identified as the major problems which are impeding the growth of software industry. These are summarized in the following tables under four functional areas:
o Fiscal
o Human Resource Development
o Infrastructure
o Marketing
A. FISCAL PROBLEMS
1. High rate of Duties & Taxes on Hardware and Software
2. Absence of export incentive
3. Absence of Domestic software industry
4. Complicated banking procedures
5. Bank borrowing rate is prohibitive
6. Difficulties in Customs clearance
7. Fund constraints for computer purchase
8. Absence 9. Absence of funds for market promotion
of sources of financing
10. Absence of funds for R&D
B. HUMAN RESOURCE DEVELOPMENT PROBLEMS
1. No strong Government agency for promoting growth of IT, particularly HRD.
2. Acute shortage of tutors
3. Graduates lack computer skills
4. Number of graduates in computer related subjects is very low
5. Course curricula for computer related subjects do not reflect market needs.
6. Quality control of computer training courses lacking
7. Low level of computer literacy
8. Facilities for high level training in IT inadequate.
9. Interaction between industry and academic lacking.
C. INFRASTRUCTURE PROBLEMS
1.  No copyright protection for software, which deters
Foreign firms from out-sourcing from Bangladesh.
2.  Facility for high speed data communication is limited.
3.  Internet connection slow.
4.  Internet connection expensive
5.  No facility for video-conferencing
6.  BTTB satellite communication links slow and expensive
7.  Customs clearance at ports is time consuming
8.  Lack of latest books, journals and manuals.
9.  Association of firms involved in Software Development
and Data Processing Services does not exists.
10. Strengthen EPB’s role to support software export
12. Poor National telecom infrastructure
13. No communication hub in the country
14. Lack of mechanism for implementation, monitoring and
updating of policy for software export.
D. MARKETING PROBLEMS
1. Capability of Bangladeshis in software sector is not known
internationally.
2. Tendency to use pirated software deters foreign firms.
3. Domestic market is very small.
4. Efforts to market Bangladeshi ability/products lacking.
5. No organized publicity of capabilities of firms involved in software
development.
6. Difficulties in obtaining direct access to market.
7. No participation in international fairs, which provide opportunities for
marketing
8. No opportunity for exhibiting local software capabilities.
9. Marketing efforts in large software markets non-existent.
10. Information on Bangladesh IT professionals lacking.
11. Quality of Bangladeshi software developers unknown.
12. Opportunities for IT manpower not exploited.

The barriers in ICT SME financing in Bangladesh:

There are many integral barriers standing in the way of ICT SMEs today. As this report focuses on entrepreneurial development in ICT industry, the barriers have been divided in some logical segments. They are described below.

1. The Lack of Seed capital

One of the first and foremost barriers for ICT Industries in Bangladesh is the lack of seed money for ICT companies. As an unrealistic trend goes on here, where the fresher form IT related institutions are more interested in entrepreneurial steps more than the seasoned veterans, the obvious inexperience in the business field makes it very difficult for new start ups. Two of its more dominant features are

 Idea generation, concept demonstration.
 Nurturing startups

The first problem is with market worthy product design and new ideas. The entrepreneurs here lacks the proper knowledge of demonstrating a concept to financiers as well as have minuscule opportunity from the financier themselves for doing so. The other great problem is for the startups to nurture their institutions, i.e to ride out the potential loss in the first few quarters and gain experience to developed improved and business worthy strategies. The two reasons are interlinked as nurturing a startup often requires more work in the field of financing as well as idea generation.

2. Lack of Long-term capital

Our local ICT companies suffer most from the lack of long term capital. Though the current history in global economic scene encourages more financing in IT sector, Bangladesh is surprisingly different in this respect.

Banks and other Financial Institutions are legendary in their un-acceptance of an IT
Entrepreneurial idea. Despite having record growth rate in the region and all over the world the trend for Bangladeshi FIs are heartbreaking in the sense that more than 100% less productive sectors like real estate development is given more preference over IT entrepreneurships. Which originates these related problems for a startup.

a. Company level infrastructure development.
b. Process, technology and quality capacity development.
c. Human resource development.
d. Product development.
e. Business development.
f. Management capacity development.

3. Short-term capital

The same problems apply for this segment. As a highly dynamic field the sudden increase in working capital requirement is not unexpected. IT entrepreneurs in most cases fail to attract working capital finance which in turn makes them unable to meet client requirements and loose more money in turn. More on this genre are

a. Working capital against work orders.
b. Short-term loan dealing with cash-flow gap.

4. Capital for clients for sourcing software solutions.

The most profitable venture for IT companies is the growing mega market of outsourcing. Without unfettered financial support they fail to accept sourcing requirements from clients from abroad. The lack of capital here constitutes of Human resource development, working capital and outsourcing from within.

Sources of finance for ICT SMEs:

As this report focuses on the entrepreneurial development for IT sector the current possibilities for finance in this sector are also listed below.

 Love money. ( In house investments accumulated by the entrepreneurs)
 Public grants.
 R&D, concept generation, company incubation.
 Angel investors. ( Silent or sleeping partners, financing the project not operating it )
 Loans from financial institutions.
 Venture capital fund.
 Capital market.

Current status of access to finance:

The current position or status is more or less discouraging for an ICT company. The current status for IT financing is listed below.

 Limited availability of love money.
 Limited availability of public grants.
 Limited or non-availability of VCs.
 Limited availability of institutional financial products.
 Constraints in implementation of available products.

Causes of Current Status:

Causes of current status cannot be summarized in one point. During our preparations for this report, we came across some of the leading causes that proponent the current position or status in IT financing in Bangladesh. They are listed below.

 Lack of awareness and confidence.
 Weak capability of making the valuation of intangible assets of software companies.
 Low risk management capability.
 Lack of demonstration that substantial return could be obtained by investing in software (both in vendor and user levels).

Propositions:

This stalemate can be overcome by taking both short and medium term consideration for strengthening the current IT sector. In our view, they can be divided in two segments

a. The structural or integral change propositions  and
b. The policy propositions

The structural or integral change propositions

 To convince financial agencies to provide seed capital for startups.
 To mobilize love money and angel investors.
 To develop, promote and implement the guideline for making valuation of intangible assets of software companies.
 To work with financial institutions for developing and offering financial products.
 To encourage homegrown and international VCs.
 To demonstrate that investment in software is low risk with the potential of high return.

Proposition on policies:

It is easily recognizable that it is not possible to implement all the recommendations at once, and that all the suggested measures are not needed at the same time. Therefore, recommended actions can be classified under ‘Short Term’ and ‘Medium Term’, depending on the priority and importance. (The time frame for Short Term should be in our view a year and for Medium Term 3 to 4 years). We feel that in the very rapidly changing scenario of IT Industry growth, it is very difficult to go for a longer time horizon.
The recommendations have been grouped under the following areas , the same way that the problems have been identified elsewhere in this report:
• Fiscal
• Human Resource Development
• Infrastructure
• Marketing

Short Term
Fiscal
a) To exempt Computer Hardware, Software, Peripherals, Communication Equipment, related components, and spare parts thereof, from Import Duty, VAT, Infrastructure Development Surcharge, Import License Fee, Advance Income-Tax etc.
b) To allow Tax Holiday for the export-oriented Software and Data Processing Services Industry, for 10 (ten) years (a unit will be considered export-oriented, if at least 70 % of its revenue comes from export).
c) To give a 15 % price advantage (i.e. “domestic preference”) to local Software developers over import of the same products.
d) To allow export of Software and Data Processing services through Sales Contract, instead of Letters of Credit.
e) To bring the Bank interest rate on loans / advances / overdraft down to the level applicable to other export-oriented thrust sectors.
g) To create a Special Fund to be administered by the Ministry of Science and Information & Communication Technology for giving interest-free loans to teachers and students for purchase of computers and related equipment, through financial institutions who should be reimbursed with the interest lost.
h) To create a Venture Capital Fund of at least Tk.10 Crore at Export Promotion Bureau for equity participation in export-oriented Software and Data Processing Services Companies.

Human Resource Development
a) To introduce ‘Basic Computer Skills’ as a Compulsory Subject for all students in all Universities of the country at Graduation level, starting from 1998.
b) To introduce ‘Computer Science Department’ in all Polytechnics, BITs, Universities and selected Colleges, with at least 50 seats per class per year per institute.
f) To empower Bangladesh Computer Council to develop a national examination and certification system for the private IT Training institutions, to give Certificates to those passing such examinations, and to encourage employers of both Government and Private Sectors to give preference to such Certificate holders for jobs.

Infrastructure
a) To enact appropriate laws for the protection of Intellectual Property Rights, as required under the WTO Charter.
b) To set up low-cost high-speed data and voice communication link with the USA and the UK, with a minimum speed of 2 Mbps. Private Sector should be allowed to provide such service along with BTTB.
c) To set up an Internet Node in the country.
d) To make Internet connectivity available at affordable rate, not exceeding Tk.0.50 (fifty paisa) per minute of use.
e) To make Video Conferencing facility available through VSAT.
f) To allow Private Sector to set up their own Satellite Communication links in order to obtain competitive price advantage and greater availability of Communication facilities.
g) To create separate Cells at Chittagong, Dhaka, Kamalapur and Benapole Customs Houses to handle all incoming and outgoing equipment / documents /data media of export-oriented IT Industry, so as to ensure clearance of such equipment / documents within 24 hours.
h) To create a Central Resource Center at Bangladesh Computer Council with current Books, Magazines, Periodicals, Software, Manuals etc. on IT related subjects.
i) To encourage software firms to form an association primarily to protect the interest of the Software and Data Processing Services Sectors, in line with NASSCOM, ASOCIO, WITSA, JISA etc.
j) To assign one Assistant Director of Export Promotion Bureau for this sector on a full time basis.
Marketing
a) To arrange meetings/seminars in selected locations in USA with a concentration of IT Professionals of Bangladeshi origin (e.g. Silicon Valley, California, USA) to inform them about the incentives being provided by GOB and mobilize their support to help Bangladeshi entrepreneurs. These meetings should be addressed by policy makers/high officials/IT professionals representing GOB.
b) To ban use of all pirated Software in all organizations, both in the public and private sectors.
c) To encourage all Government, Semi-Government, Autonomous organizations, Sector Corporations, Banks, Insurance Companies etc. to replace the manual system of documentation and records by Computerized system through the use of locally developed Customized Application Software.
d) To send Marketing Missions to North America / E. U. consisting of Members from IT Associations and EPB, on a regular basis, with a view to publicizing Bangladesh Software and Data Processing Services capabilities as well as establishing personal contacts with the prospective customers.
f) To explore the possibility of obtaining business on sub-contract basis from the suppliers of Software and Data Processing Services in India, Sri Lanka and the Philippines etc.
g) To empower Export Promotion Bureau to ensure regular participation in all major International Exhibitions / Fairs for IT products and services.
h) To ask the concerned Trade Associations to organize International Exhibitions / Fairs in Bangladesh for IT products and services, in collaboration with Export Promotion Bureau.

In recent years, like other developing countries of the world, Bangladesh has been focusing attention on the most disadvantaged group in the society – the women. Realization has gradually dawned on all concerned that a society cannot afford to waste half of its human resources by discrimination on grounds of sex. This increasing awareness on the part of the government has led to the adoption of national policies to facilitate a development process involving women in all spheres particularly in economic activities focusing especially on entrepreneurship development. The overwhelming majority of women in Bangladesh are not only poor, but also caught between two vastly different worlds — the world determined by culture and tradition that confines their activities inside family homesteads, where they are regarded more as a commodity necessary only for bearing and rearing children and the world shaped by increasing landlessness and poverty that focus them outside into various economic activities for survival. In Bangladesh, the women entrepreneurs, who have accepted the challenges of life and have emerged as leaders in the socio- economic development, earn for themselves and for their families or contributing towards the socio- political upliftment of the women. In our country women lack assistance is in the access to credit, provision of skill training, and market facilities.

Women entrepreneurship in the rural industries is a new arena in the socio- economic environment of Bangladesh. In view of the need to bring the rural womenfolk in the development stream of the country, both the Government, the NGOs and other related agencies have provided ample opportunities to promote entrepreneurial skill among women. Income- generating activities, credit facilities, skill training, market opportunities have all combined to pave the way for the emergence of entrepreneurial development among women in rural Bangladesh.

Women have achieved good prospects in industry, especially the small and cottage and micro-home-based ones. Their present involvement in manufacturing and in the recent trends of their involvement in construction activities in growing numbers is likely to continue. Women have emerged as exporters and their control of export- oriented industries, are promising areas for enhanced female participation and employment. Women’s growing involvement in the construction of civil works gives evidence to their potential regarding market growth opportunities and should be encouraged. To stimulate female entrepreneurship and create further employment opportunities, training programs for relevant issues, need to be provided to women currently in business. Where women have access to market information and display of products they can increase their business acumen, especially with respect to demand for a wide- range of products they might choose to produce.

Types of Production Units and Trades include the common small scale production units such as Handicrafts with various types of raw materials, Handloom Weaving & Spinning, Basketry, Mat making, Manufacture of Coir products. Fishing Net making, Paddy husking by Dheki, Oil production by Ghani, Jute production and sale, Jute goods production. Pottery, Cane and bamboo products, Seri culture, Silk weaving, Honey Making, Screen print & Batik, Embroidery, Dressmaking. Tailoring, Puffed Rice Making, Food production( packed or retail sale of dry food), Food Processing, Wood craft & Furniture, Molasses making, Biri( indigenous cigarette made with special leaves) production, Milk production units, dairy and milk products, Dyeing and printing, Book Binding, Confectionery, Urea Molasses Block( cattle feed) etc., Nursery and Horticulture production. Kitchen gardening, poultry rearing( sale of eggs, poultry, chicks), goat and sheep rearing, cattle fattening are common agro- based occupations.

Women entrepreneurs should be provided special facilities to develop their enterprises. These include:

(1) Development Banks with separate advisory service cell for women;
(2) Separate counters in counters in commercial banks for women;
(3) Arrangement of exclusive fairs to promote products manufactured by small & cottage based units;
(4) Fixed quota of stalls for women entrepreneurs at export fairs;
(5) Special market facilities both in the domestic and the international arena.

Government resources are limited. Infrastructure development and other broad sectors of economy demand and consume major share of the national development budget. It is thus sometimes said that poverty alleviation goal receives more palliatives than substance. In face of things as they stand, both the GOs and the private sector have a major responsibility to promote entrepreneurship development for women. Without that the advancement of women will remain a far cry.

Role played by BSRS for women entrepreneur development:

On behalf of the government BSRS has arranged some policies and schemes to promote the development of women entrepreneurship. Very few women entrepreneurs have so far taken loan from BSRS. This is due to the loan granting process and the formalities that are required to meet make a bit difficult for women to get the loan amount. However BSRS with the help of some other NGOs’ has taken initiatives such as:

(1) Setting up of a Women Entrepreneurship Development Cell;
(2) Identification of women entrepreneurs of Bangladesh;
(3) Planned Publication of a directory of women entrepreneurs with their
addresses, forms of business, products manufactured etc.;
(4) Organizing entrepreneurship development training;
(5) Co-organizing convention of women entrepreneurs, discussion meetings on the problems and prospects of women entrepreneurship in Bangladesh in the grass root level
(7) Arranging market opportunities.

Women in ICT: Bangladesh View:

General perception of ICT sector comes as a non discriminatory sector. With intellectual labor as its capital, ICT can become as a magic wand to disseminate all inequality.

This year marks (March 08) the 96th International Women’s Day (IWD). Pursuant to the declaration by the Socialist Party of USA, the first National Women’s Day was observed across the United States on February 28, 1909. But in the 2nd International Conference of Socialist Women, held in Copenhagen in 1910, it was resolved to observe an annual women’s day as a uniform international action. The date was nominated in recognition of the United States’ Garments workers’ demonstration, which was held on March 08, 1857. The purpose of the demonstration was to increase the wage and reduce the working hours of the Garments workers. Government of Bangladesh started to observe the International Women’s Day since March 08, 1984.
International Women’s Day stands for equality between women and men. During International Women’s Year in 1975, International Women’s Day was given official recognition by the United Nations and was taken up by many governments throughout the world. International Women’s Day is a time to reflect on progress made to call for change and to celebrate acts of courage and determination by ordinary women who have played an extra ordinary role in the history of women’s rights.
In our country also women are being seen in frontlines to fight against hunger, poverty and environmental degradation. So, on this day, let us think about empowering women also through ICT (Information and Communication Technology). Because it is an essential part like other goals for winning the fight in the lives of women. It will increase resources in their hands to be self reliant and empowered and reduce discrimination against them. It is a part of placing their issues at the forefront of policy action.
Micro-credit for self-employment empowers women’s decision-making capacity. Likewise, an amount of money, which women need to be ICT experts and to establish ICT firms, will help them earn more money and to be more empowered. 2005 has been declared as the Year of Micro Credit by the United Nations.
This is why Government of Bangladesh as well as the non governmental organizations (NGOs) should start to distribute small loans among interested women to encourage them to be self-reliant by learning and working in ICT sector. The third of the Millennium Development Goals (MDGs) of the United Nations is to achieve gender equality and empower women. It seeks to rectify the disadvantages through policies and programmes which build women’s capabilities, improve their access to economic and political opportunity guaranteeing their safety. So, ICT will definitely play a supportive role to reach this goal soon.

How can ICT help women?

ICT can benefit women in many ways. It can facilitate their participation in different sectors and different regions. It can provide the information women need to improve their own well-being and that of their families. The introduction of computers into offices has improved the quality of work and scope for women in data entry, analysis, programming, clerical and administrative occupations. More over ICT allows them to exchange views, opinions and information so much, which may not be possible through other media.
ICT has a strategic link with poverty reduction. The Internet, email and mobile phones top the list of new tools. ICT can directly empower women as well as the poor people by offering access to services historically unavailable to them because of high cost or lack of infrastructure, particularly in rural areas. Now buying-selling or renting ICT equipment itself is a source of income. Mobile phone has already ushered in such income among many a rural woman in Bangladesh. The computer training institutes in our country should set the course curriculum in accordance with the need and demand of our country. Access to the Internet is still very limited for several reasons, like poor teledensity, poor electricity, poor affordability of computer and knowledge about the Internet. Public Internet access is very limited in the private telephone canters and cyber cafes. Though the divisional headquarters and some district towns have access to Internet, but the commercial use of Internet is limited due to the bandwidth limitation. Despite the rapid fall in the cost of the Internet services, it is still high for the general people and students. That is why it is necessary that,
*Access to Internet exchange should be at par throughout the country.
*A high-speed national data network for the country connecting all important cities, district headquarters and important upazilas should be established. BTTB’s upazila level Internet project should be implemented.
*Technical assistance from internationally reputed companies should be sought to build proper networking infrastructure throughout the country. The relationship with International Telecommunication Union (ITU) should be strengthened for reducing digital divide.
*Proper use of Global Information Superhighway should be ensured.
*All schools, colleges and universities should be brought under Internet network. This is an emergency programme to be initiated earlier. As a result women from rural areas will be able to get access to use of Internet as well as to be trained up on ICT.
Access to ICT at university level has achieved a very limited success. The ICT penetration in primary, secondary and higher secondary level is not satisfactory at all. Only a limited number of urban schools and colleges have ICT facilities for education purpose. There is a huge mismatch between the market demand and the courses offered. We do not produce adequate number of qualified ICT professionals in our educational and training institutions to cater to domestic demand. The migration trend of quality ICT professional is alarming. So, we should:
*Implement education programme in software engineering, computer communication and multimedia with curriculum that incorporates the latest technology.
*Introduce ‘basic computer skills’ as a compulsory subject for all students at Intermediate and Graduate level.
*Polytechnics and other training institutes should offer diploma in ICT.
*Unemployed girls, women and youth should be encouraged and given priority for ICT training courses vis-à-vis market demand.
*Diploma and trade courses should be introduced in distance education system through ICT network under Open University.
* A national specialized training of teachers centre should be established for solving the problem of acute shortage of quality teachers in ICT.
* Female students and teachers of university and colleges should get free or subsidized access to Internet.
*All universities and higher educational institutions should be networked for better access to knowledge and information.
*Primary and secondary level education should be emphasized for long run return in ICT industry.
*More training institutes on ICT for the girls and women should be established. Poor and meritorious students, unemployed girls, women should be given free of cost training, accommodation, training materials etc.
* After completion of training, bank loan may be offered to them on easy terms to set up cyber café or computer, training institute in urban and rural areas.
*’JAWS’ talking software can be given free of cost from the educational institutes or Govt. offices to the visually impaired female and male students as well as the normal software to the disabled students.
*Govt. of Bangladesh, BTTB as well as the mobile phone companies in our country should encourage more unemployed women to run business of phone, FAX, computer compose, etc.
ICT policy : Women Issues

Honorable Prime Minister has already declared ICT as the thrust sector. The ICT policy aims at building an ICT-driven nation comprising of knowledge-based society by the year 2006. According to the ICT policy, to implement the target areas, we should work hard from now and take necessary initiatives earlier. On the other hand, more female IT professionals should be encouraged to join in accomplishing the policy and to reach the goal of ICT also as a part of opening and building up their carrier.

Conclusion

To be kept focused on the subject of entrepreneurship during the course of this report was one of the most rewarding experiences. As we took BSRS to portray the investor outlook on entrepreneurship, in our view, a rare glimpse inside the corporate mindset toward SME entrepreneur development has been unveiled.  We have explored both the entrepreneurial and the facilitator viewpoints as we have also introduced Fornix Soft Ltd. As a case study to see the results of BSRS financing in entrepreneurship. We tracked the growth of Fornix Soft. We connected the reality with the theory of entrepreneurial development that we studied in this course, in the critical analysis section. We have also tried to analyze the performance of BSRS by introducing numerical data for the past 6 years. We explored their loan disbursement/recovery performance critically.

In this paper we focused on the ICT industry. As we were to produce this report on SME entrepreneurial development, our view of ICT industry both as a thrust potential industry and an industry consisting SMEs  largely made us focus on that. We also explored the participation of women issue in view of the ICT industry. At the end, we followed the market trend and tried to piece together a case in point of the prospects and barriers; and propositions for the ICT industry for entrepreneurial development.