International financial institution expands operations in Mongolia, focusing on small-scale sectors
The European Bank for Reconstruction and Development (EBRD) has announced a significant investment in Mongolia's XacBank, the country's second-largest microfinance institution. This investment aims to support micro, small, and medium-sized enterprises (MSMEs), particularly those owned by women and located outside the capital city of Ulaanbaatar.
## Purpose of EBRD's Investment
The primary objective of the EBRD's investment is to increase financial inclusion, a key driver of economic growth and job creation. By focusing on MSMEs, the EBRD seeks to empower women in the business sector and stimulate rural development.
## Impact of EBRD's Investment
The EBRD's investment in XacBank is expected to have a profound impact on Mongolia's economy. It will contribute to economic growth through the expansion of MSMEs, create jobs both directly and indirectly, and enhance the capacity of the financial sector to serve these businesses effectively.
Moreover, the investment will bridge the gender gap in economic opportunities by supporting women-owned businesses and promote gender equality. Additionally, the investment can facilitate trade by providing necessary financial resources to MSMEs, enabling them to participate more actively in domestic and international markets.
## Partnership with XacBank
XacBank, with 55 branches across the country and mobile banking services reaching 180 soums, covering 56% of all settlements in Mongolia, is well-positioned to implement the EBRD's strategy. The finance will also provide XacBank with a $1 million limit for trade finance to bolster financing imports and exports by its clients.
This investment marks the EBRD's first investment in Mongolia, signifying its commitment to encouraging competition in the Mongolian banking sector and improving living standards. The Mongolian Cooperation Fund, set up in March 2001, with total funds from donor governments worth €10.3mn, has also played a role in this partnership.
## The EBRD's Role in Mongolia
The EBRD has been actively involved in Mongolia, working on various donor-sponsored technical assistance projects, including financial institutions, aviation, telecommunications, and power. The EBRD has also been instrumental in the reform of Mongolia's legal system.
The EBRD's micro and small enterprises programmes have helped establish or expand specialized micro and small business finance units, supporting over 1 million small enterprises throughout eastern Europe, Russia, Central Asia, and the Caucasus. The $1 million trade finance facility being extended under the Trade Facilitation Programme (TFP) is another testament to the EBRD's commitment to fostering economic development in the region.
The TFP involves more than 100 issuing banks and over 600 confirming banks globally to facilitate imports and exports. With over 5,000 transactions financed and a turnover of over €2.7 billion under TFP, the EBRD's impact in this area is substantial.
In conclusion, the EBRD's investment in XacBank is a strategic move to foster economic development in Mongolia through financial inclusion, gender equality, and rural development. It plays a crucial role in supporting MSMEs and enhancing their capacity to contribute to the country's economic progress. The loan disbursement to XacBank will occur after October 15, following the amendment to the agreement establishing the EBRD.
The EBRD's investment is a significant step towards supporting businesses in Mongolia's emerging markets, particularly small-businesses and micro, small, and medium-sized enterprises (MSMEs). This partnership with XacBank aims to improve the financial sector's capacity to serve these businesses, facilitating their participation in both domestic and international trade finance markets. The investment also supports women-owned businesses, bridging the gender gap in economic opportunities and promoting gender equality.
