In Bangladesh, the recognition of locally developed software as an intangible asset-especially for the purpose of monetary valuation and using it as collateral for loans-has been under discussion among policymakers, industry stakeholders, and financial institutions for several years. Here's a summary of the current landscape and related policy initiatives:
 
Current Policy Landscape in Bangladesh
1. Software as Intangible Asset
>>According to the Bangladesh Financial Reporting Standards (BFRS), software can be considered an intangible asset if:
>>It is identifiable, controlled by the company, and
>>Expected to generate future economic benefits.
>>Companies can record internally developed software in their balance sheet under IAS 38: Intangible Assets, provided development costs can be reliably measured and meet capitalization criteria.

2. Monetary Valuation and Collateral Use
While valuation is possible for accounting purposes, banks and financial institutions in Bangladesh typically do not accept software as loan collateral. This is due to:
>>Challenges in valuation standardization.
>>Difficulty in enforcing claims on intangible assets in case of loan default.

3. Policy Development & Advocacy
The ICT Division, Bangladesh Association of Software and Information Services (BASIS), and Bangladesh Bank have been in discussions about:
>>Developing a framework to recognize software as a valuable business asset.
>>Creating valuation guidelines and audit mechanisms for software.
>>Advocating for a policy to allow software-backed credit financing.

4. Relevant Initiatives
>>Startup Bangladesh Limited under the ICT Division has provided equity funding, partially recognizing tech IP.
>>In 2020, the Bangladesh Bank issued circulars to promote collateral-free loans for startups, which could indirectly benefit software firms.
>>Digital Bangladesh vision encourages development and export of local software, implying future support for asset recognition.

Policy Gaps and Future Recommendations
1.    Standardized Valuation Model
Develop a national guideline or policy for evaluating locally developed software, perhaps under a joint initiative of BASIS, BIDA, and Bangladesh Bank.

2.    Legal Framework for IP Collateral
Amend laws or introduce new regulations to allow IP-backed financing (similar to what India and Singapore have explored).

3.    Capacity Building
Train banks, auditors, and valuation experts on IP and software valuation practices.

4.    Pilot Programs
Launch pilot financing schemes using local software as collateral under selected banks or fintech firms.

Conclusion
While Bangladesh currently lacks a full-fledged policy to allow locally made software to be used as loan collateral, there is increasing recognition of its economic value. Formal policy adoption would require collaboration between regulatory authorities, industry bodies, and financial institutions.

Writer: Mohammed Samiul Islam, Managing Director, Ubique Corporation Ltd., Z Tech PLC