“Report on Access to Finance”

Course Title: Principles of Finance

Course Code: FIN 101
Section: 8

Submitted to:

Ms. Nasima Khatun

Department of Business Administration

Submitted by:
Serial Name ID
01. Syed Md. Mutasim Mahin 2018-1-13-070
02. Tabassum Rabby 2017-1-10-121
03. Motahar Hossain 2018-1-10-205
04. Sinthia Akther 2017-2-10-153
05. Sayeda Jahan 2014-2-10-154

Date of Submission: 03-12-2019

INTRODUCTION
Finance

Finance is defined as the management of money and includes activities like

investing, borrowing, lending, budgeting, saving, and forecasting. There are
three main types of finance: (1) personal (2) corporate (3) public/government.
There are many ways to access to finance.

Access to Finance

The objective of the Access to Finance for MSMEs activity is to raise

awareness and share information and good practices among all MED countries
about existing public policies, mechanisms and instruments supporting MSMEs
financial needs for development (e.g. guarantees, risk capital, and
microfinance). This activity on access to finance was highly stressed by all SBA
coordinators as a key element of the Project’s success.

The Project’s goal in this respect is to contribute unlocking Access to Finance

for MSMEs (A2F) in the MED region, as current studies clearly indicate that
access to finance remains insufficient compared to overall MSMEs needs (in
most MED countries, less than 20% of credit financing goes to MSMEs).
Implementing such policies would expand the private sector through the
development of more robust, inclusive and sustainable growth, by raising
MSMEs capacity, creating employment and improving competitiveness.

One fundamental feature of this activity is the creation of a “Working Party on

Access to Finance”, composed of one high-ranking responsible per MED
country with strong technical expertise in the area of finance. Close
collaboration with national technical experts is viewed as a very important
parameter in structuring the Euro-Med industrial cooperation dialogue to tackle
technical issues in the A2F domain, offer tailored solutions to the expressed
needs of their MSMEs and design and implement effective policy
recommendations.

EXAMPLE (Share Issue)

The share market is a stock market, however besides shares of companies, other
instruments are traded too. The share market is a source for companies to raise
funds and for investors to buy part-ownership in owing businesses and grow
their wealth. In a share market, shares are bought and sold. The stock market
refers to the collection of markets and exchanges where regular activities of
buying, selling, and issuance of shares of publicly-held companies take place.

Investing in early-stage businesses involves risks, including illiquidity, lack of

dividends, loss of investment and dilution, and it should be done only as part of
a diversified portfolio. Syndicate Room is targeted exclusively at sophisticated
investors who understand these risks and make their own investment decisions.
Tax relief depends on an individual’s circumstances and may change in the
future. In addition, the availability of tax relief depends on the company
invested in maintaining its qualifying status. Past performance is not a reliable
indicator of future performance. You should not rely on any past performance
as a guarantee of future investment performance.

Money investment process in share market:

In share market we have 2 stock market. That is Dhaka stock exchange and
Chittagong stock exchange. To invest in share market, we need to create a BO
account from brokers' house in Motijheel, Gulshan etc. In BO account required
NID card & 1 nominee's photo. After we need to add a bank statement. We add
our bank statement or check because the transaction of our share investment
run through this account. Then the following part is the buying processor.

The stock market is divided into two main categories: primary and secondary
market. In the primary market, securities are issued and subsequently listed on
stock exchanges. Trading in these securities happens in the secondary market.

A public issue introduced in the primary market can be of two types-an initial
public offering (IPO), or a follow-on public offering (FPO). An IPO is used
when an unlisted company wants to raise equity capital by issuing shares. It
results in the company's shares getting listed on a stock exchange. In an FPO, a
listed company issues shares to the public. It can be either a fresh issue or an
offer for sale.

There are also many categories in Security like A,B,Z etc. Only, z category
securities can't sell before 15 work in days. Rest of the shares cannot sell before
3 work in days.

To buy share we need to pay CDBL charge 0.005% per share. But within (1-
5000) taka share we need to pay 25tk.

Then we invest in share market in securities saw the previous price, market
price, interest rate & dividend.

The Advantages of a Share Issue

The big advantage of a share issue over a bank loan is that you don’t have to
pay the money back. A bank loan must be repaid, and the cheeky bank manager
wants interest on top of the repayments.
When you issue shares to an investor, it’s a different setup. Instead of the
regular repayments, you get an injection of cash you can purely use to build up
the business.

The investor doesn’t expect any money to come back to them. They’re waiting
to see if you can grow the company big enough for it to be worth serious money
later. Eventually, of course, the investor will want their money back, but this is
usually when you sell the company, and they get much more money back.

A share issue has a very positive effect on your company’s cash flow, which
means that you can get on with growing the business and pay for the resources
you need to build it more quickly.

 High Return
 Easily Transferable
 Doesn’t Have to be Repaid
 No Interest is Payable
 Limited Liability
 Benefits for Issuing a Company
 Voting Rights

Three characteristic benefits are typically granted to owners of ordinary shares:

voting rights, gains, and limited liability.

Common stock, through capital gains and ordinary dividends, has proven to be a
great source of returns for investors, on average and over time.

Companies also benefit from issuing shares in that they do not incur debt
obligations, although they do forfeit some of the ownership's stake.
The disadvantages of a share issue: 

Share market is a place where anyone can easily buy shares with a very
minimum amount of money but still there are some limitations or disadvantages
in the share market. People who buy shares get many benefits or there are many
advantages for them but those who sell shares face some problems which is also
disadvantages for them. Business owner’s worry that they may lose the control
from the business by issuing shares to someone else because no one wants to
share their business with anyone else. The disadvantages of a share issue is
given bellow: 

1. Loss of control/ giving away ownership: whenever you think about

issuing share, the first problem that come to your mind is losing the
control from the business. Issuing shares to investors means that investors
become a part of the ownership of a business/ company. That means they
have the right to give their opinions and also can see how the company in
running the business. For that the owner’s ideas can be disagreed and
disputed by the shareholders. Also new shareholders have the legal rights
on the business that can reduce the flexibility of the business to follow a
plan of action. Mainly it’s very hard for owners to adjust with the new
shareholders.
 
2. Shareholders in disengagement: this is another problem that can come
when a business issue shares to the people is that the investors start to get
more interested and involved in the business. As investors have the right
on the business they will start telling what to do in the business. This
situation can create pressure for the owners and make them stressful. To
avoid this situation people can do like, they can come up with a great
 idea, wants to know if you agree and then gets going to set it up. That is
shareholders engagement. 

3. Profit sharing / reduce owner’s profit: ‘when’ you sell shares of your
business, you are also ready to dividing the profits that are being
generated by the company. The more shares you issue, the wider the pool
of investors you will have taking a share of your company profits. For
that the original owner will suffer because they will be losing much of the
profit they would have earned through revenues. Also there is another
problem which is if the owner is planning to sell the business in future or
in 3 years and 35% of the share of the business is owned by the
shareholders then there will be 35% less of the sale price for the owner. 

4. Dividend payment: ‘when’ you issue shares you definitely offering a

monthly or quarterly dividend to provide as a reward for investors to
attract them and make them take a chance on your company. If investors
buy the shares they have the right to those dividends as you have agreed
to give them. And if you somehow default on a payment, they could hurt
your company’s reputation. This can also reduce the share price. Because
if they say any negative things about your company in the market people
will stop or reduce buying your share which will decrease your share
price. 

Example of Access to Finance:

Who are investing in the share/stock market with little money?

Share market has many shares in very lower price for those people who are
actually cannot buy higher prices share. The base principle that a good investor
in the stock market goes by is “buy low and sell high”. Some strategy refers to a
trading or business decision that does not entail any expense to execute. Some
people are cannot buy higher price share. Now, we are going to define who are
investing small amounts of money as something more than tk.100, but not more
than tk.1000.

Examples:

~Students:

Students do not want to buy higher price share. So, they have to take little
money for investment. If anyone want to start a business but their family not
agree with them but they have little money then they can do it. Actually it is a
good habit investing in stock market at an early age, it gives them a strong
foundation by the time they want to pursue it seriously. There are many sources
where students can invest if they have tk. 1000.They can put their money low
initial investments mutual funds. And play it safe with treasury securities.
Without proper understanding if they jump into it, it is just waste of time. For
the beginner, they have to spend many days reading some quality articles or
some good books they can start invest some small amount in the market. Later,
they can start invest some small money. The journey has quite well so far. After
investment students can constantly learning and not afraid to make mistakes. As
they get college education, they can also getting an education in building
wealth. They do not need million of money to start investing journey; they just
have to know how to do it. According to financial experts, Students have
significant advantage over other types of investors. They have time lots of it.
Experienced investors state that even a small amount of money, if invested
properly, can reap huge profits in the future. As a student, once you become
familiar with how the financial market works, they can start to invest in
individual bonds or stocks. After small investment they can understand how to
access their investment and also can gain knowledge about share market
investment. Then they can take more risk and invest their money for a longer
time period, they may try investing their capital in mutual funds. There are lots
of tools that they can use to simplify their investment decisions. When students
invest on money they read books, follow a mentor, take online courses, get
expert advice, analyze the market. For doing this type of things, they can
observe environment of share market in their real life.

As there are also some lower level people like rickshaw puller or a house maid
who can buy shares.

~Rickshaw puller/House maid:

A rickshaw puller or a house maid cannot effort too much money for
investment. So, they have to invest little money on share market. They are
beginning with small capital and find a broker that will accept the small
account. They can increase their capital by investing more money on a regular
basis. This is not a sarcastic or a joke. Rickshaw puller or house maid do not
have excess funds for investing. For them in share market their many sources to
invest money. And also there are low risks like treasury securities. The best
investment a poor person can make is in them either through education or by
acquiring skill. A rickshaw puller or a house maid never happy with their
income. They have to invest time also for that pays them some good return.

CONCLUSION:

Access to finance alone doesn’t necessarily lead to beneficial usage.29 countries

are committing to consumer protection and financial capability. The financial
inclusion support framework can support countries to accelerate responsible
financial inclusion. Government must also commit consumer protection and
financial capability. Advice to those seeking finance in Bangladesh can be
obtained from various sources. Some MFIs augment their lending with business
development services, which can also serve as a platform for adapting a
business to be more suitable for bank financing. Apart from facilities such as
BIF, potential borrowers can also make use of available assistance, including
the Bangladesh Bank website comparing interest rates being charged by banks.
However, the hopeful conclusion from the session was that there is an
opportunity to form partnerships with service providers, so that IBs can build
the capacity that gives them a better chance of securing finance on suitable
terms.

REFERENCES:

1. https://www.inclusivebusiness.net/ib-voices/access-finance-bangladesh

2. https://www.thejoyofbusiness.co.uk/how/the-advantages-and-disadvantages-of-a-

share-issue/

3. https://www.investopedia.com/ask/answers/050615/what-are-some-advantages-

ordinary-shares.asp
PARTICIPATION

 Syed Md. Mutasim Mahin (2018-1-13-070) - Introduction,

conclusion, advantages of share issue, margin the term
paper.
 Tabassum Rabby (2017-1-10-121) – Disadvantages of share
issue.
 Motahar Hossain (2018-1-10-205) – Money investment
 Sinthia Akther (2017-2-10-153) – Examples
 Sayeda Jahan (2014-2-10-154) – Slide making