The European Bank for Reconstruction and Development (EBRD) and Khan Bank – one of the largest commercial banks in Mongolia – continue their efforts to improve access to finance for micro, small and medium-sized enterprises (MSMEs).
The two institutions have signed a commitment for US$ 8 million equivalent in local currency financing as the third tranche under an existing US$ 25 million framework dedicated to value chain finance – an innovative financial instrument that allows the suppliers and distributors of MSMEs with links to big corporations to obtain more competitive financing.
In a step towards developing the local capital market, the new loan is being made in Mongolia’s local currency, the tugrik (MNT).
Last year, Khan Bank on-lent the proceeds of the first two tranches totalling US$ 17 million to MSMEs, including US$ 5 million in subloans to about 51 businesses in value chains in Mongolia. The bank has developed the value chain finance product further, forming new relationships with large corporations, which act as sponsors by providing credit enhancement support to their SME suppliers/distributors.
Norihiko Kato, the CEO of Khan Bank, said: “This is our first time borrowing in MNT from the EBRD. Thanks to the EBRD’s support of value chain finance, we will be able to better meet the expectations of our current and potential customers. We will provide improved access to finance for MSMEs that work with large corporations as suppliers or distributors. We are pleased to propose high-quality finance to these customers.”