Financing private sector champions in Mongolia

By Lucia Sconosciuto

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The EBRD supported the expansion of Mongolian ice-cream maker Teso with local currency lending and business advice.

Making ice-cream in Mongolia, where winters are very long and extremely cold, might not appear to be the most promising line of business for a successful firm.

In truth, Mongolians have been in love with ice-cream for a long time, some say for hundreds of years - since the Mongolian Empire’s horsemen rode through the freezing Gobi Desert carrying cream and later discovered it transformed into an ice-cold delicacy.

The recipe, it seems, spread to China and from there it reached Italy via that celebrated traveller and businessman, Marco Polo.

Centuries later, it took a family of seven siblings another journey and the same spirit of adventure to establish their own ice-cream company.

The EBRD and the donors of the Early Transition Countries Fund are supporting Teso, a Mongolian private sector champion who started with a small ice-cream production and today provides jobs to over 1000 people.

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When in the late 1990s Damjin Odon, his sisters and brothers left behind agricultural trading in their remote village of Western Mongolia for Ulaanbaatar, all they had was a second-hand ice-cream machine in a small rented room - and many challenges.

“During that time, some of my siblings were students working as part-time salespeople, accountants and distributors,” recalled Mr Odon, Board Chairman of conglomerate Teso, now one of the country’s top enterprises, active in many sectors beyond food manufacturing.

The company is directed by Mr Odon’s sister, Narankhuu, and promotes the role of female employees, which has resulted in a high percentage of women in senior management positions.

However, a solid business cannot rely on strong entrepreneurship and hard work alone. To keep up with the competition, grow and expand, it needs available finance, something EBRD studies show local business people in Mongolia need more of. The shortage is a real obstacle to their development.

To boost private sector champions in countries at the early stages of transition to market economies, the EBRD provides comparatively small- scale direct financing to medium and larger-sized local enterprises.

Such funding fills a financial gap and temporarily compensates for the constraints of the local banking sector due to risk, size or type of financing required.

Given Teso’s sound reputation and the management skills of the Odon family, the EBRD backed their plan to improve their products’ quality and introduce new technologies.

With the support of the Early Transition Countries (ETC) Fund*, the EBRD helped the company improve its accounting through business advice and provided a US$ 5.5 million-equivalent loan in local currency.

This helped Teso to purchase new equipment and install a new production line for higher quality ice-cream.

This was the EBRD’s first corporate loan in Mongolia denominated in local currency. It was possible thanks to the EBRD’s local currency lending programme in the ETCs, which is underpinned by a donor-funded risk-sharing facility.

“This EBRD long-term, soft loan in local currency supports our sustainable growth and provides us with an opportunity to invest in future business development,“ said Mr Odon.

“Today we employ over a thousand people in various industries thanks to our staff’s effort, commitment, but also thanks to the support of international and local business partners and investors.”

“A taste of happiness,” reads Teso’s ice-cream packaging. After years of dedication that’s what Teso’s success tastes like to both its employees and the Odon family.

*Donors to the ETC Fund are: Canada, Finland, Germany, Ireland, Japan, Korea, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland, Taipei China and the United Kingdom

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