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ADB to Help Develop Mongolia’s Small Enterprises, Leasing Sector via Loans
MANILA, PHILIPPINES (3 July 2014) – The Asian Development Bank (ADB) is providing a loan package to a private sector bank to help address the funding gap of micro-, small- and medium-sized enterprises (MSMEs), and to a financing company to support the nascent leasing sector in Mongolia.
ADB has approved a $30 million loan directly to XacBank and a $10 million loan to XacLeasing through its parent company, TenGer Financial Group (TFG). TFG is also the holding company of XacBank.
“MSME growth is needed to help diversify the country’s economy, which relies heavily on the mining industry, and growth of the leasing industry will also be important to provide an alternative source of finance for businesses,” said Christine Engstrom, Director of the Financial Institutions Division at ADB’s Private Sector Operations Department.
MSMEs make up 98% of all enterprises in Mongolia, of which three quarters are considered microenterprises. However, it is estimated that only about 10% of the small- to medium-sized enterprises regularly access finance through banks. There is, therefore, significant unmet financing demand from the MSME segment in Mongolia.
XacBank, Mongolia’s fourth largest commercial bank, has set high governance standards since its inception. It also pioneered microfinance and serves the traditional ger (tent) areas, where 60% of the capital’s population lives. The XacBank loan will complement an ADB sovereign program that will help improve the standard living conditions in the ger areas of Mongolia’s capital Ulaanbaatar.
By lending to TFG and XacLeasing in addition to XacBank, ADB will also have the opportunity to support the country’s emerging leasing industry, which is important since many businesses struggle to provide collateral typically required by banks.
XacLeasing provides leases to companies and individuals, primarily equipment leasing for small businesses and passenger vehicles for individuals, and has been active in Mongolia since 2007.