MANILA, PHILIPPINES – The Asian Development Bank (ADB) has signed a $40 million loan agreement with Khan Bank, one of the biggest banks in Mongolia, to provide better access to bank financing for the country’s micro, small- and medium-sized enterprises (MSME).
The loan will be used to expand Khan Bank’s MSME portfolio to 35% of its total loans by 2020 from 26% in 2013, helping to create jobs. Although Mongolia has grown quickly in recent years due chiefly to its large mining sector, the benefits of that growth have passed many people by, as only 4% of the labor force works in mining.
“The loan will help address critical challenges being faced by the MSME sector in Mongolia by making available at Khan Bank more loans for MSMEs with longer repayment terms,” said Monisha Hermans, an ADB Investment Specialist. “The growth of MSMEs in non-mineral-based resource sectors will help diversify and strengthen the resilience of the country’s economy.”
Norihiko Kato, CEO of Khan Bank said: “We appreciate ADB’s strong support for Mongolian MSMEs through Khan Bank which enables us to effectively use and finance our growing MSMEs portfolio both in existing and new clients. We are delighted of our continuing long term cooperation with ADB to diversify our long term funding and to boost our competitiveness in the Mongolian market.”
MSMEs comprise 98% of all enterprises in Mongolia, with three quarters considered microenterprises. Only an estimated 10% of them regularly access financing through banks, which often focus their operations on top-tier and larger companies as they are perceived to be less risky.
Khan Bank, established in 1991, is Mongolia’s largest bank in terms of total assets, loans and deposits. It has a strategic focus on the underserved MSME segment by offering products such as working capital, trade finance, and capital expenditure financing through electronic and mobile banking. It also has the largest branch network in rural areas.
Khan Bank is the second Mongolian bank to receive such a loan from ADB. In December 2013, ADB provided a $30 million loan to XacBank for MSME onlending.
