Mongolian Financial Sector Framework

Location:

Mongolia

Project number:

37081

Business sector:

Notice type:

Private

Environmental category:

FI

Target board date:

18 Sep 2007

Status:

Board approved

PSD disclosed:

22 Jun 2007

Project Description

The proposed USD 30 million framework aims to increase financial intermediation in the Mongolian banking sector. This project will permit provision of term loans for on-lending transactions in favour of micro, small and medium enterprises (MSMEs) to partner commercial banks, leasing companies, consumer finance companies, non-bank finance institutions, pension companies and insurance companies (collectively, NBFIs). In addition, the framework will include equity investments in selected financial institutions.

Transition Impact

The facility will increase intermediation in the financial sector through term debt financing, which will enable a wide range of financing to reach end users that presently have little or no alternatives for term funding. It will also support the financial sector in Mongolia through a combination of debt and equity financing and will promote the best practice in corporate governance and strengthen financial discipline. Competition should also improve in the sector by including several banks in the framework. The facility is expected to show a demonstration effect as the first such multi-bank framework facility by IFI.

The Client

Participating partner commercial banks and NBFIs.

EBRD Finance

USD 30 million in debt and equity facilities to financial intermediaries. The first proposed transaction under the framework will be a USD 10 million loan to Khan Bank.

Project Cost

USD 30 million.

Environmental Impact

The project will comply with EBRD’s Environmental Procedures for Small and Micro-Loans” and Environmental Procedures for EBRD Intermediated Lending through Local Banks. The participating partner institutions shall comply with local national environmental, health, safety and labour regulations and standards as well as with the Core Conventions of the International Labour Organisation related to child and forced labour and discrimination at work and submit to EBRD Annual Environmental Report in a format and contents satisfactory to the bank.

Technical Cooperation

Technical cooperation (TC) funding of up to USD 6.5 million will be sought to accompany the Framework in order to achieve the stated goals under this framework. TCs will encompass a wide range of areas including but not limited to credit advisors for on-lending to MSMEs and for residential mortgages, associated projects with any equity transactions. The main rationale for the proposed TC is to encourage partner institutions (commercial banks (FIs) and non-bank financial institutions including microfinance institutions (NBFIs)) to develop into full-service banks serving MSMEs and individuals requiring financing and other debt and/or savings products through a focused TA aimed at delivering specific credit and management skills and setting up appropriate institutional structures. ETC Fund is providing the initial EUR1 million to improve MSME lending procedures, training personnel and providing support to the institutions in maintaining high portfolio quality.

Company Contact

n/a

 

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