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EBRD signs first investment in Mongolia
$6 million financing for XacBank to support small enterprises and trade
By providing a $5 million loan to XacBank LLC, EBRD is signing its first
investment in Mongolia. The finance will allow XacBank to expand its
operations to private micro and small businesses and thus support a vital
segment of the country’s economy. In addition, the EBRD will provide XacBank
with a $1 million-limit for trade finance to bolster financing imports and
exports by its clients.
XacBank is Mongolia’s second largest microfinance institution with 55 branches
located in each of the country’s regional centres and the capital Ulaanbaatar.
It offers business, consumer, rural and other loans such as mortgage finance
or financial leases. While XacBank’s focus is on microfinance, the bank aims
to expand its activities and become a universal bank.
The Mongolian banking sector is still highly concentrated in Ulaanbaatar and
larger towns. Financing of micro and small enterprises, particularly in rural
areas, and foreign trade remains a major challenge which the EBRD will address
by providing finance for on-lending to local clients.
The $1 million trade finance facility is being extended under the EBRD’s Trade
Facilitation Programme (TFP) in which more than 100 issuing banks in the
Bank’s countries of operations participate together with some 600 confirming
banks globally to facilitate imports and exports to and from the region. More
than 5,000 transactions have been financed with a turnover of more than €2.7
billion to-date under TFP.
EBRD President Jean Lemierre said the Bank was delighted to start commercial
operations in Mongolia and stressed that strengthening the financial sector
would be a key priority. By supporting XacBank’s ability to satisfy the
financing needs of enterprises and importers and exporters the EBRD would
encourage competition in the banking sector, which is expected to benefit
consumers, generate employment and improve living standards.
The CEO of XacBank, Ganhuyag Chuluun, said XacBank is honoured and proud to be
the EBRD’s partner in its first landmark deal in Mongolia. The proceeds of the
loan will be allocated to address the financing needs of the low-income
marginalized population in remote areas, nomadic herders and small businesses
through its countrywide branch network and mobile banking services, which
reach 180 soums (smallest regional units) corresponding to an outreach of 56
per cent of all settlements in Mongolia. XacBank welcomes the EBRD’s extensive
experience and knowledge of transition, which will help speed up economic
reform in Mongolia.
The loan to XacBank will only be disbursed after 15 October, the date on which
the amendment to the Agreement Establishing the EBRD permitting Mongolia to be
a country of operation comes into effect. However, the EBRD had already been
working with the country on various donor-sponsored technical assistance
projects. The Mongolian Cooperation Fund was set up in March 2001 with total
funds from donor governments worth €10.3 million, of which €8.5 million have
been committed to provide support in areas such as financial institutions,
aviation, telecommunications and power. The EBRD has also worked with Mongolia
on the reform of the country’s legal system.
Through its micro and small enterprises programmes the EBRD has supported over
one million small enterprises throughout eastern Europe, Russia, Central Asia
and the Caucasus. The EBRD has worked with 84 commercial banks and non-bank
microfinance institutions to establish or expand specialised micro and small
business finance units and has lent €560 million to facilitate close to €8
billion in loans to micro and small businesses in the region.
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