EBRD lends $8m in local currency for Mongolian MSMEs

Microfinance Focus, July 13, 2010: The European Bank for Reconstruction and Development (EBRD), has recently announced a synthetic loan worth $8 million in local currency to XacBank for financing micro and small businesses in Mongolia. Established in 1998, XacBank is the second largest microfinance bank in Mongolia, with a wide network of branches throughout the country. The EBRD holds approximately ten per cent equity stake in XacBank

Extended under the EBRD’s Mongolia Financial Sector Framework, the loan will enable XacBank to meet the growing demand for local currency financing and increase further its outreach to entrepreneurs in remote areas. The synthetic local currency loan, the first one provided by the EBRD in Mongolia, will help XacBank increase the term of its local currency funding, and expand its portfolio of loans in Togrog. This will enable XacBank’s clients to repay their loans in the same currency as they earn from their operations. 

It is envisaged that a technical assistance will accompany the loan financing to further strengthen the bank’s MSME lending business by providing capacity building and strengthening risk management and internal control practices.

“With this transaction and in close cooperation with our partner bank XacBank, the EBRD is deepening its support for Mongolian micro and small enterprise sector which is an essential element for private sector growth in Mongolia.  This local currency facility is the first the EBRD has executed in Mongolia and it will enable XacBank to mitigate the foreign currency exchange risks for its clients”, said Head of EBRD Office in Mongolia, Philip ter Woort.

Mr Bold Magvan, Chief Executive Officer of XacBank noted “We are glad to sign the local currency financing  agreement with EBRD, the second loan agreement with the Bank. The local currency long term facility is being provided by EBRD first time after researching XacBank’s performances, which signifies the sustainability, development, and the success of the Bank’s operations. We believe there will be more cooperation opportunities in future for XacBank and EBRD.”

Since the beginning of the EBRD’s operations in Mongolia in 2006, the Bank has committed over €294 million in various sectors of the Mongolian economy, with total projects cost of €936 million. Mongolia Financial Sector Framework is a $50 million facility established by the EBRD to provide much needed access to finance to local commercial banks, leasing, insurance and consumer finance institutions, pension companies and non-bank micro finance institutions.

© 2010, Microfinance News. All rights reserved. 2008-09