Credit line will support MSMEs and energy efficiency
The EBRD is providing Mongolia’s Khan Bank with a US$ 50 million (€45 million equivalent) credit line to support the competitiveness and resilience of the country’s economy.
The financing package for Khan Bank, one of the leading banks in the country and among the EBRD’s oldest partners in Mongolia, will increase access to finance for private businesses. It will consist of three loans which will be used to support (a) micro, small and medium-sized enterprises (MSMEs) with up to €27 million, (b) value-chain financing that will also benefit small businesses, with up to €13.5 million, and (c) sustainable energy improvements for up to €4.5 million.
Khan Bank will on-lend to its clients the funds provided by the EBRD. The bank will also benefit from a €250,000 technical cooperation programme funded by the European Union’s Asia Investment Facility.
Irina Kravchenko, EBRD Head of Mongolia, said: “We are very pleased to be providing these new opportunities for small businesses in partnership with Khan Bank, one of Mongolia’s largest commercial banks, which provides access to finance in even the most remote areas. We consider projects such as these to be among our strategic priorities in Mongolia.”
In order to become more resilient, Mongolia’s economy needs to reduce its dependence on large enterprises and develop more small and medium-sized firms. For this, these companies – particularly in remote and rural areas – need more access to long-term funding.
The EBRD’s credit line to Khan Bank will help to address this issue. At the same time, the finance will provide much-needed funding for MSMEs that are part of value chains also occupied by large contractors, suppliers and sponsors.
The remaining part of the credit line will help companies reduce their energy consumption. This is crucial in Mongolia, where the average energy intensity per capita is more than double that of other EBRD countries of operations and carbon intensity per capita is three times higher. Over 90 per cent of the total primary energy supply comes from coal and oil, with most electricity and heating generated by ageing coal-fired plants that are in great need of rehabilitation and investment.
The EBRD loan will help private enterprises switch to more energy efficient technologies to make the Mongolian economy greener. It will be provided under the EBRD’s Mongolian Sustainable Energy Financing Facility, one of the EBRD’s pioneering climate-finance frameworks, and will come with a technical cooperation programme of €1.4 million funded by the EBRD Shareholder Special Fund.
Mongolia became an EBRD country of operations in 2006. The Bank is currently the largest multilateral investor in the country, with a total of about €1.4 billion (US$ 1.7 billion) invested to date and all projects in the private sector.