Special report: Mongolia aims for a brighter banking future

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Celebrating 90 years of banking in Mongolia.

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Banking system marks its 90th anniversary
Mongolia’s banking sector has come a long way since its foundation, with Russian help, in 1924. The industry proved resilient during the financial crisis and competition has stimulated expansion and innovation, although there are worries about over-dependence on the resource sector.

As Mongolia moves away from dependence on mineral resources, Bold Sandagdorj, chief economist and advisor to the Bank of Mongolia, explains the central bank’s role in creating more sustainable economic growth.

Bold Magvan is president of the Mongolian Bankers Association and CEO of Tenger Financial Group. Tenger’s largest subsidiary XacBank is a systemic bank in Mongolia with 10% of market share; the group also has leasing, insurance and investment advisory arms, and a greenfield microfinance company in China.

Hampered by a lack of liquidity and trading activity, capital markets have been slow to evolve, despite government efforts to create a sympathetic regulatory environment.

Foreign investors ponder potential
Mongolia’s rich mineral resources have attracted considerable foreign capital but the government also now hopes to attract investment in its efforts to diversify the economy. The long-running dispute over the Oyu Tolgoi mining project may be dampening interest, however.

Bringing banking to the steppes
Despite its small and widely dispersed population, Mongolia rates highly in the financial inclusion stakes.

Expansion and consolidation
Even after a series of closures and mergers, Mongolia probably still has too many banks for its small population.