RSF – Khan Bank Full Recourse Line

Location:

Mongolia

Project number:

47819

Business sector:

Financial institutions

Notice type:

Private

Environmental category:

FI

Approval date:

30 Sep 2015

Status:

Disbursing

PSD disclosed:

29 Jul 2015

Transdlated version of this PSD: Mongolian

Project Description

The EBRD is providing a financing package of up to USD 60 million to Khan Bank in Mongolia.

The Facility will comprise:

(i) a senior loan for on-lending to private micro, small and medium enterprises (“MSMEs”) with a Value Chain Finance (“VCF”) component for up to USD 30 million

(ii) an energy efficiency (“EE”) loan of up to USD 10 million under Mongolian Sustainable Energy Financing Facility (“MonSEFF”) for financing sustainable energy projects in the country

(iii) a Full Recourse Direct Risk Sharing Facility (“RSF”) of up to USD 10 million for the provision of long-term financing to private local MSMEs and

(iv) an increase of trade finance limit of up to USD 10 million.

The operation will enable Khan Bank to expand its core business in Mongolia and improve its funding structure.

Transition Impact

The MSME/VCF Loan will contribute to market expansion by increasing the availability of longer tenor funding to private MSMEs, including areas outside Ulaanbaatar. The VCF element will support Khan Bank’s ongoing efforts in rolling out this still-pioneering product for the local market.

The Energy Efficiency Loan will be the second sub-project under the MonSEFF facility and will contribute to a positive demonstration of energy efficiency investments and promotion of products new to the economy as well as to building capacity of Khan Bank in sustainable energy lending. The Bank will build expertise in assessing the risk and creditworthiness of clients for sustainable energy investments and enhance their capability in identifying clients with sustainable energy-saving potential. Sub-borrowers, supported by technical cooperation (TC) are expected to learn the technical and financial benefits of Sustainable Energy Investments to improve their operations.

The RSF Facility will further enhance the competition in the Mongolian banking sector by enabling Khan Bank to service the lending needs of large and medium-sized private clients in longer-term loans.

The increase in the TFP limit will support the development of Khan Bank’s trade finance business and export-import operations of its corporate clients. The Project promotes trade, which directly benefits the real economy.

The Client

Khan Bank is one of the largest commercial banks in Mongolia by total assets and loan portfolio with a market share of 23% and 24% respectively. The Bank has a universal focus and a nationwide presence through more than 500 offices.

EBRD Finance

Up to USD 10 million.

Project Cost

Up to USD 60 million to be provided in USD.

Environmental and social categorisation, impact, and mitigation

Categorised FI (ESP 2008). Khan Bank is an existing client of the Bank and has adopted an Environmental Policy and Environmental and Social Procedures that largely satisfy requirements of Performance Requirements 2 and 9. Khan Bank will need to apply their environmental and social procedures to the MSME loans and all sub-loans funded out of EBRD funds, and ensure that sub-borrowers comply with national requirements for environment, health and safety and labour standards; in addition, the sub-borrowers financed through the Energy Efficiency facility will need to comply with the eligibility criteria for Energy Efficiency projects. Khan bank will need to ensure an ongoing compliance with PRs 2 and 9 and submit satisfactory annual environmental and social reports.

Technical Cooperation

Between 2008 and 2012 Khan Bank benefited from technical assistance for MSME lending under the Mongolia Multi-Bank Framework: MSME Lending and Leasing (USD 2 million for all partner financial institutions). The funding was provided by EBRD Early Transition Countries Fund and EBRD Shareholder Special Fund.

The Bank also received technical assistance under the Medium-sized Co-Financing Facility (MCFF) which was established as part of a set of instruments to provide funding to medium-sized enterprises in selected countries of operation. The donor source was the Early Transition Countries Fund.

The EBRD commissioned a Feasibility Study to ascertain the viability and benefits of Value Chain Finance (VCF) in Mongolia. The EBRD involved Khan Bank in the study, benefitting from its largest banking network in the country. The TC was funded by the EBRD Shareholder Special Fund.

TC under current operation:

EE Loan

The EE loan to Khan Bank will benefit from EUR 1.4 m TC available under the MonSEFF framework and funded by the EBRD Special Shareholder’s Fund.

The TC package will support the identification and assessment of eligible sustainable energy projects, capacity building to Khan Bank in sustainable energy lending and marketing support.

RSF

RSF line assumes providing TC funds on sub-loans depending on the needs of projects from ETC team donor funds. Moreover, RSF line will encompass an ability to provide technical assistance to the partner bank in assessing and document preparation process.   

Company Contact

Bolortuya .B, Senior Officer – Investment Banking Department

Khan Bank LLC
Seoul Street-25, PO.BOX-192, Ulaanbaatar, Mongolia

E-mail: bolortuya.b@khanbank.com
Website: www.khanbank.com

Tel: +976 11 332 333 Fax: +976 70 117 023

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

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Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

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