ULAANBAATAR, MONGOLIA (16 December 2019) — The Asian Development Bank (ADB) and XacBank signed today a $30 million A loan agreement—as part of a financing package which includes cofinanciers—to support expansion of XacBank LLC’s financing to micro, small, and medium-sized enterprises (MSMEs) in Mongolia, focusing on those owned by women and located outside Ulaanbaatar. This is XacBank’s second private sector loan from ADB.
Mongolia’s MSMEs generate half of the country’s employment and account for 90% of registered businesses. However, access to credit is constrained, especially for women-owned enterprises, which find it particularly difficult to provide the collateral required by banks. MSMEs consistently report access to credit as a major barrier to investment and growth, and loans to MSMEs make up only about 20% of all outstanding commercial loans in the country. A portion of the ADB loan proceeds will be lent by XacBank to women-owned MSMEs and a portion will be dedicated to MSMEs located outside of Ulaanbaatar, where economic development lags the capital and the poverty rate is 7% higher.
“MSMEs are key drivers of employment in Mongolia, where there is also a need to diversify the economy away from natural resources,” said ADB Country Director Mr. Pavit Ramachandran. “ADB is providing long-term stable financial support for XacBank, which will help it to mitigate funding risks and focus on expanding their MSME business, in turn enabling these businesses to create new jobs.”
“This funding will allow us continue building on our strength and help to meet financing needs for local companies, thereby contributing to Mongolia’s economic development,” said XacBank Chief Executive Officer Mr. Tsevegjav Gumenjav. “Also, our strong commitment to servicing women-run MSMEs aligns well with the gender mainstreaming goals of ADB’s Strategy 2030.”
XacBank is one of the largest commercial banks in Mongolia and a market leader of MSME financing solutions, including its innovative product lines such as lending for businesses owned and led by women and eco-lending, both of which are cost efficient to borrowers and regarded as sector benchmarks.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.