The European Bank for Reconstruction and Development (EBRD) is providing a loan in Mongolian tugrik – equivalent to US$ 3 million – to XacLeasing Mongolia, which is a diversified specialised leasing company and the second largest provider of leasing services in Mongolia. The funds will be used to finance leases to small and medium-sized enterprises (SMEs) with a particular focus on machinery, equipment and vehicles.
Leasing is a small but growing sector in Mongolia, where it represents an important alternative to bank lending for SMEs in need of vehicles and equipment. Almost 90 per cent of all registered businesses in Mongolia are SMEs. However, many SMEs have limited access to long-term bank financing owing to lack of collateral and credit history.
Noel Edison, the EBRD’s Director for Insurance and Financial Services, said: “This project is the EBRD’s first engagement with the leasing sector in Mongolia and it will increase the availability of long-term local currency funding for SMEs that are under-served by bank finance. The development of SMEs is of strategic importance for the economy, as SMEs account for most employment and make a high contribution to GDP.”
Tsevegjav Gumenjav, the CEO of XacLeasing added: “XacLeasing is one of the leading companies in Mongolia for the development of leasing products. The EBRD’s financing will not only help us to increase leasing to SMEs, but will also help our clients to avoid foreign exchange risk. The loan from the EBRD will be provided in Mongolian tugrik, as will most of the leasing contracts with our clients.”
Since 2006 the Bank has invested about US$ 1 billion in over 60 projects across Mongolia and has mobilised approximately twice that amount in further financing for these projects from other sources, with a focus on infrastructure development, energy, support for small and medium-sized enterprises and strengthening of the financial sector.