The Mongolian Bankers Association (MBA), a nonprofit association of financial institutions in Mongolia; the International Finance Corporation (IFC), the private investment arm of the World Bank Group; and the European Bank for Reconstruction and Development (EBRD), a development finance institution headquartered in London, recently hosted a roundtable event to deliberate on lending reforms with respect to broadening access to finance for small and medium-sized enterprises (SMEs) and other borrowers in Mongolia. The group endorsed the Secured Transactions Reform, an initiative to establish a legal framework for the provision of loans secured with ‘movable collateral. Funded and implemented by the European Union, the Swiss State Secretariat for Economic Affairs (SECO), EBRD and IFC, the reform is to encompass the establishment of a nationwide registry for equipment, accounts receivable, inventory and other types of movable collateral. The registry is expected to provide real time information on competing claims on the same collateral.
As regards implementation, IFC will contribute technical assistance regarding setting up the registry and training lenders on best practices for movable collateral lending. EBRD’s Legal Transition Team contributed by advising the Ministry of Justice on the draft law and other supporting legal changes.
According to the President of MBA, Bold Magvan, “Banks are eager to enhance access to finance through this proven approach of systematically registering movable collateral. This will benefit both lenders and borrowers.” In a similar vein, Philip ter Woort, Head of EBRD’s Mongolia Resident Office reportedly remarked, “The Secured Transaction Reform aims to improve SME access to finance and thus could be a contributing factor to Mongolia’s economic diversification.”
By Chioma Okwudiafor, Research Associate
About International Finance Corporation
The International Finance Corporation (IFC), a member of the World Bank group offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. As of 2011, IFC has 182 member countries, total assets of USD 68.5 billion and USD 12.2 billion mobilized to 518 projects.
About European Bank for Reconstruction and Development (EBRD)
The European Bank for Reconstruction and Development (EBRD) is a development finance institution headquartered in London. The bank began operations in 1991 upon the agreement of 40 countries and is now owned by 61 countries as well as the European Investment Bank and the European Union. It aims to finance operations that are both commercially viable and assist development in 29 countries in Eastern Europe, Central Asia and more recently in Southern and Eastern Mediterranean region. It does this by providing loans, debt securities, equity investments, guarantees and technical assistance to micro- and small businesses via commercial banks and non-bank microfinance institutions (MFIs). In 2011, EBRD disbursed a total of EUR 6.7 billion (USD 8.3 billion).
About Mongolian Bankers Association
The Mongolian Bankers Association is a non-governmental organisation established by banking and non-banking financial institutions officially licensed to operate within the territory of Mongolia. As of 2012, there are 16 member financial institutions, 14 commercial banks and two non-bank financial institutions.
Sources and Additional Resources:
EBRD Press Release: Mongolian Banks Support Reforms to Increase SME Lending. Secured Transactions Reform aims to enable lenders to secure loans with “movable collateral” http://www.ebrd.com/english/pages/news/press/2012/121019.shtml
MicroCapital Universe Profile: International Finance Corporation (IFC)
https://www.microcapital.org/microfinanceuniverse/tikiindex.php?page=International+Finance+Corporation+%28IFC%29
MicroCapital Universe Profile: European Bank for Reconstruction and Development (EBRD)
https://www.microcapital.org/microfinanceuniverse/tikiindex.php?page=European+Bank+for+Reconstruction+and+Development+%28EBRD%29
MicroCapital Story: June 29, 2012, MICROCAPITAL BRIEF: European Union (EU), European Bank for Reconstruction and Development (EBRD) Partner to Support Small and Medium-Sized Enterprises in Mongolia, Turkey
https://www.microcapital.org/microcapital-brief-european-union-eu-european-bank-for-reconstruction-and-development-ebrd-partner-to-support-small-and-medium-sized-enterprises-in-mongolia-turkey/#more-19342
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