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|
Population (millions) |
2.4 |
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Gross domestic savings (% of GDP) |
14.5% [2001] |
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% Population under $2/day (PPP) |
50% |
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Regulated microfinance institutions |
Commercial banks, NBFIs, savings and loan cooperatives |
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Non-regulated sources of microfinance |
NGOs, pawnshops |
General Approach to Regulating
Based on the Comparative Database on Microfinance Regulation by the IRIS Center of the University of Maryland
| Banks | NBFIs | S&L Cooperatives | |
| Definition or description of institution | Commercial banks are generally institutions that raise lending and investment capital from both shareholders and depositors. | Financial intermediaries engaged in certain financial activities. Can be licensed as a credit NBFI or a service NBFI. | Member-owned organizations not offering deposit-taking services to the public. |
| Guidelines & restrictions on financial services | Permitted: Deposits, loans, payment services, guarantees, foreign exchange, securities, financial leasing, investment and consulting services, and other financial services.
Prohibited: non-banking business activities, land transactions | Permitted: Loans, factoring, payment services, remittances, guarantees, foreign exchange, securities, financial leasing - only upon authorizations from the BoM
Prohibited: deposit-taking | Permitted: Deposits from members |
KHAN BANK
From the paper: Banking the Underserved: New Opportunities for Commercial Banks, Financial Sector Team, London, 2005
Five years ago, the Government of Mongolia's state-owned agricultural bank was in receivership and facing possible liquidation after more than a decade of political interference, mismanagement, loan losses, and numerous brushes with insolvency. Many in the international community felt that the bank could never operate sustainably and should be closed. However, an enlightened partnership between the Government of Mongolia and the donor community recognised and leveraged the bank's latent assets, namely its existing extensive rural branch network franchise and its corresponding access to a large and underserved market. The bank's subsequent rapid turnaround and successful privatisation highlight the potential of commercially oriented microfinance to transform even the most troubled banks into profitable and sustainable providers of financial services to underserved markets. Today, the Ag Bank of Mongolia, now known officially as Khan Bank, is an institution best described by superlatives.
External technical and financial assistance has been critical for Khan Bank's restructuring, downscaling, and privatisation. However, the bank currently operates entirely free from direct subsidy.
The financial performance of the privatised Khan Bank has been remarkable by most measures. In terms of profitability, ROE was 52.3 percent in 2002, more than twice the overall banking industry's average ROE of approximately 23 percent in the same year, and asset growth also outpaced the industry. Although ROE fell to 42.9 percent in 2003, the bank remained the most profitable in Mongolia based on both ROE and a return on assets of 2.8 percent.
In terms of loan volume and outreach, the bank disbursed 878,000 loans between late 2000 and February 2004, and as of February 2004, 128,227 loans were outstanding for a portfolio of almost US$50 million with an arrears rate consistently below 2 percent. Moreover, the small average outstanding loan size of US$382 reflects deep rural outreach, where 90 percent of all of Khan Bank's lending takes place. Khan Bank has seen significant growth in its deposit base and had US$75.5 million in 377,424 deposit accounts in February 2004.
See also:
Khan Bank, The Agricultural Bank of Mongolia, 2005, by Gutin, J.
Scaling up Poverty Reduction: Case Studies in Microfinance, 2004, by CGAP (The Agricultural Bank, Mongolia, page 27)
Savings and Credit Unions in Mongolia, 2002, by Tokeshi, J.
Equity Investments in MFIs and Transformation: The Case of XAC, Mongolia, 2001, Cater, R. & Chulun,G
Sub-sector Review of Microfinance in Mongolia, UNDP
Mongolia: The Microfinance Industry, 2005, Yaron, J. & Sandagjav, N.