By Steve A. Morrell
The traditional banking system has not found an alternative to collateral as a major condition for lending. Insistence by banks on movable or immovable property prior to extending loans to customers goes back decades. But Venturengine, a local Venture Capital concern, dedicated to ‘empowering entrepreneurs’, is claiming to have made a difference.
Venturengine explained at a press conference on Tuesday that they lend funds but at no time do they insist on collateral. This thought provoking claim seemed to have been substantiated when many entrepreneurs present at the press conference confirmed that the payback system at Venturengine was solely on trust and respondents’ performance.
CEO, Takas, Lahiru Pathmalal, at an informal discussion during the press meet confirmed that he was first to the banks with his ‘Takas’ business idea. They did not consider his request for funds irrespective of his bona fides and established creditability. He said let alone not lending funds when required, he was not even afforded an interview by the CEO. They reportedly said to him, ‘ we cannot lend on business ideas’ and literally “threw the book” at him. That was the attitude of some banks here. He declined identifying the bank(s) he interviewed.
The ‘Takas’ idea was a novel one for start-up funds for business and what Pathmalal said was, above all, Venturengine had time to listen. ‘I had nothing but this business idea. Spelt it out. Next, they said they would lend. The rest, as they say, is recent history, Pathmalal explained.
Is it that the local banking system has not progressed since the archaic ‘collateral’ era? Two bankers we contacted agreed there was an “informal” system operative currently. They said, ( they declined identification),take for instance foreign remittances; banks are not the only medium through which these remittances are sent to beneficiaries here.
Co-founder, Blue Ocean Ventures, Prajeeth Balasubramaniam confirmed all they wanted was a feasible Business Plan.
Sponsor, Group CO, Dialog Enterprise, Jeremy Huxtable when questioned by the press said he would not divulge the quantum of funds Dialog sponsorship involved. He gave no inkling on such amounts. Additionally, other sponsors too did not indicate fund transfers for sponsorship.
Chairman LAN Eric Wickramanayake said although Venture Capital’s funding base was Rs. 500 million, their lending and start up finance was not insubstantial. Currently 15 entrepreneurs were funded, and each ensured such enterprise was effectively managed to realize profits.
Co-founder, Blue Ocean Ventures, on behalf of Indian Angel Net Work, Rajan Anandan, reverting to a question by the press on the validity of banking and credibility of that system, said that same question was answered previously, but his subsequent explanations were inadequate.
Balasubramaniam explaining further said, in general, entrepreneurs could get financing for their enterprises subject to credibility of their plans, and such plans being evaluated and approved for funding.