Banking
From The Report: Mongolia 2014
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Mongolia’s banking system is relatively young and untested, and, therefore, the Central Bank of Mongolia is facing a range of challenges. One such example is the rapid drop in the tugrik, which lost approximately 20% of its value over the past year, placing pressure on the banking system but also reducing the price of exports. Currently, there are no limitations placed on foreign ownership of banks, nor are there capital controls, and two banks are 100%-owned by foreign companies. The key to the future for the Mongolian banking sector is good corporate governance and sound supervision, while the challenge for the central bank will be to return to a traditional role, draining liquidity from the system, and easing back on policies without compromising the system’s strength. Developing financing for smaller companies will also be key to ensuring Mongolia’s long-term economic growth.
This chapter contains interviews with Randolph Koppa, President, Trade and Development Bank; and Ayumi Konishi, Director-General, East Asia Regional Department, Asian Development Bank.

Articles from this Chapter

Overview

Looking ahead: A strong foundation despite ongoing challenges
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As the Mongolian economy weakens, the country’s banking system faces challenges. Assets on balance sheets are looking far less solid and customers are finding it harder to service their loans as growth slows and as the boom of recent years comes apparently to an end. Nevertheless, the core of the Mongolian banking system is quite sound. Banking During The Slowdown The three best-managed institutions are regarded as keeping their books in good shape and are seen withstanding moderately severe…

Interview

OBG talks to Randolph Koppa, President, Trade & Development Bank
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Interview: Randolph Koppa Could the Savings Bank case affect the reputation of Mongolia’s banking sector in the short term? RANDOLPH KOPPA: By late 2008 and early 2009, Savings Bank and Mongol Post Bank each had high levels of non-performing loans. They merged, although no real fresh capital was brought in, and Savings Bank was given a chance to keep going. It could not correct its problem loans quickly enough, and was not earning enough from the rest of the business to build its capital base.…

Interview

OBG talks to Ayumi Konishi, Director-General, East Asia Regional Department, Asian Development Bank (ADB)
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Interview: Ayumi Konishi What sectors other than mining present big investment opportunities in the medium to long term? AYUMI KONISHI: With vast markets on its doorstep, Mongolia can benefit greatly from trade, but the key challenge will be to create jobs at home. We have seen that mining can bring rapid growth, but this does not benefit much of the labour force. While exports are currently dominated by the mining sector, we see great potential in the field of agribusiness. With over 40m livestock…

Analysis

Learning to let go: The central bank has been a strong supporter of the economy, but may need to start backing off
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The Bank of Mongolia, the country’s central bank, has a tough job. Not only does it have to contend with international crises and crashes, like everyone else, but it has responsibility for a relatively young and untested banking system. Moreover, and more to the point, it has to deal with extreme money flows caused by fluctuating resource prices and speculative investment, all in an environment lacking capital controls and other safeguards long common in the developing world. Indeed, given the…

Analysis

Funding the little guys: Small businesses comprise the largest number of players
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The development of financing for smaller companies is vital for the Mongolian economy. While resources-focused ventures have the potential to transform the country, it will be more modest enterprises that provide stable employment and income, long-term underlying growth and locally made products. Without a vital small and medium-sized enterprise (SME) sector, Mongolia could find itself with a perpetual underclass and constantly limited by the commodity cycle. A broader base of financing options is…