Small and Medium Enterprises (SMEs) are an important job source accounting for 90% of registered businesses and approximately 50% of employment in Mongolia. Yet, up to 90% of the SMEs do not have regular access to finance through banks.
ADB is supporting access to finance in several areas through direct lending and technical assistance, including projects that aim to help Mongolia’s SMEs sustain their businesses and thereby foster growth, diversify the economy, lessen dependence on the mining sector, and create jobs.
A project is now helping commercial banks lend more easily to SMEs by backing Credit Guarantee Fund’s credit guarantees. The project will expand the financing for SMEs in sectors not related to mining.
Ulaanbaatar, Mongolia - The Credit Guarantee Fund of Mongolia and ADB are joining forces to provide $432 million in loan guarantees to Mongolia’s small and medium-sized enterprises.
This financial lifeline will create up to 13,000 jobs.
“The first loan guarantee was issued in October 2017,” says Sonor Luvsandorj, Head of Financial Markets and Insurance, at Mongolia’s Ministry of Finance.
“As of end 2018, 181 firms had approximately US$14 million of guarantees on loans worth US$24.8 million.”
Small and medium-sized enterprises can get guaranteed loans for up to 10 years.
This is 3 times longer than the typical hard-to-get loans offered by commercial banks.
“The main difficulty for business owners in Mongolia is finance, particularly access to loans,” explains Dashzeveg Byambadash, Director of MCPT LLC.
“In the past, we have submitted bank loan applications but we couldn’t get a loan because we lacked collateral,” adds Munkhbaatar Otgon, Chief Operating Officer, Gurvan Maral group.
“We tried reaching out to banks to get loans. We lacked collateral. It was a constant problem,” Gantuya Buddorj, Director of Bayandelger Khuns LLC.
The Credit Guarantee Fund of Mongolia provided a solution.
“We had a chance to obtain a discounted long-term loan with favorable terms and conditions,” Dashzeveg Byambadash, Director of MCPT LLC.
“The Credit Guarantee Fund of Mongolia is providing half of the collateral.”
“Our loan allowed us to fully automate our factories,” beams Munkhbaatar Otgon, Chief Operating Officer, Gurvan Maral Group.
“The foam factory that we are standing in right now has been converted to being fully automated.”
“After obtaining the loan, we purchased new equipment, increased our capacity and launched new products,” says Zoljargal Batbaatar, Director of Veg Art Naturals LLC.
As of the end of 2018, the guarantees had already helped secure 3,500 jobs, 1,300 of which were new.
Over 40% of the guarantees went to companies owned by women.
While nearly 29% went to firms in rural areas.
Boosting access to loans will help diversify the Mongolian economy and create much-needed jobs.