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EBRD and EU support sustainable wool products in Mongolia

By Volker Ahlemeyer

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 From goat to cashmere coat

Mongolia’s grasslands are an ideal playground for several million cashmere goats, sheep and yaks. Their world-renown wool means big business: it provides an income for around 400,000 herders, so it should not come as a surprise that locals refer to it as “white gold”.

But, for a long time, Mongolians have not seen the benefits of possessing this precious resource. Foreign traders bought the raw material and processed it abroad, so the economic upside took a detour out of the country.

This is why the EBRD teamed up with the European Union and the United Nations’ Food and Agriculture Organization (FAO) to add value across the whole production cycle – from the local farmer to exporters in Ulaanbaatar.

Sustainable farming

The story of a beautiful cashmere scarf starts in the picturesque hillside of the north-western Khövsgöl Province. The sight could not be more different from the glitzy lights of Ulaanbaatar: it is a land of animals covered in fur, not man, whom they outnumber by a healthy 25:1.

Batulzii is a local farmer who lives with his wife and young children in a traditional yurt. Cashmere goats are shorn in May, followed by sheep, he explains. They naturally start to shed their wool in June and if he does not cut it, it simply falls to the ground.

It is the first part of the chain where we strive to add value to the wool production. FAO offers training to farmers, from grassland management and providing the right feed to the animals to the relevant sustainable industry standards.

“After cutting the wool, I sell it to the Leader Cashmere factory,” Batulzii explained. “This is how I earn a living.”


The EBRD has teamed up with the European Union and the United Nations’ Food and Agriculture Organization (FAO) to add value across the whole production cycle of wool and cashmere in Mongolia – from the local farmer to exporters in Ulaanbaatar.

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From goat to coat

The EBRD supports several processing companies and provides them with the necessary advice and finance to grow their business.

Leader Cashmere is one of them and specialises in washing and combing wool and fibre, in particular cashmere. The business has also started to produce its own goods, such as esgii, a traditional felt insulation for yurts.

About twenty villages supply the family-owned enterprise with wool, but the bigger the business grew, the more its challenges became apparent, explains the manager, Ganbold Lkhagvasuren.

“We needed to increase our know-how on financial management and on opportunities outside the limited Mongolian market,” he added.

“The work with the EBRD helped us to grow to our current size, with up to 100 workers in the summertime. We want to expand further and process the wool as much as possible here in our factory. Our first step was to explore Asian markets, but our future ambition is to sell to Europe,” he said.

These advisory services are funded by the European Union and their recommendations  tailored to each business. In Mongolia’s north, Erdenet Carpet produces colourful carpets, throws and scarfs made of lamb, cashmere, yak and camel wool. The company prides itself on its sustainable production from the wool sheering to the final carpet. International buyers are very interested and the EBRD helped Erdenet Carpet to target this market segment.

It is not only advice though that companies need, but also finance to improve the production process. The EBRD does this in two ways, by providing loans to companies directly and through financial partner institutions.

Gobi JSC, for example, has received several loans totalling US$ 19 million since 2009. These have served to modernise sewing equipment, purchase additional raw material and build a new flagship store.

This helped the company to expand significantly, creating new local employment opportunities and growing into the largest cashmere producer in Mongolia.

Everybody benefits

“The lamb, goat or yak wool re-grows, so it is an entirely natural product. We are actually doing the animal a favour when we help to remove it. Everybody benefits, including our furry friends,” one producer stressed.

Consumers across the globe can obtain higher quality wool through a sustainable production. At the same time, it is also very much to the benefit of the Mongolian farmers, explains Batulzii.

“Producing more and higher quality wool allows us to increase the size of our herd,” he said. “A larger herd means higher income and I can spend the additional funds on my children’s education to help them have a better life.”

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