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Asiamoney best bank awards 2019: Mongolia


Best Domestic Bank: Khan Bank

Best Bank for SMEs: TransBank

Best Corporate & Investment Bank: Trade and Development Bank of Mongolia

Best Digital Bank: LendMN

Best Private Bank: Trade and Development Bank of Mongolia

Best Bank for CSR: Arig Bank

Award winners

Best domestic bank: Khan Bank

John Bell, Khan Bank

No financial institution better traces Mongolia’s event-rich journey from herding and farming hinterland to thriving frontier economy than Khan Bank.

Founded in 1991 to serve the nomadic population for which the nation is famed, Khan Bank is Mongolia’s biggest lender and has been at the core of its economic development. And, arguably, it is ‘exhibit A’ of the country’s ambitions to move up the value chain in a global economy driven by ideas and innovation.

Khan, it is worth noting, was the first to place ATMs out in the steppe. It offered the first automated, 24/7 transaction centres and digitally driven multi-purpose kiosks. It is not just a pioneer of mobile banking, but a disruptor in a nation that needs to raise its technological acumen. It serves more than 2.4 million of Mongolia’s three million people. Some 1.7 million of them are Khan cardholders, and the bank has nearly 56,000 corporate customers.

For this, and for its continued robust financial performance in trying times, Khan remains an easy call for our annual best domestic bank award.

Equally important is where chief executive John Bell and his leadership team are taking Khan. A veteran of the Royal Bank of Scotland, ABN Amro and Citigroup, Bell exudes an institutional wanderlust matching that of the Mongolian nomads of popular imagination.

From its humble roots as an agricultural lender, Khan has increasingly ventured into digital banking. It now accounts for some 40% of all e-banking and 88% of mobile transactions. Khan is also moving aggressively into payments.

Khan’s current obsession is improving its application programming interface (API) to make transactions easier, faster and safer. The idea is to develop new apps for customers dialling in, whether from the skyscrapers of Ulaanbaatar or the farthest reaches of the Gobi desert.

At the moment, it takes customers roughly 11 seconds to check their balance and 256 seconds to complete a transaction. Not fast enough for Bell’s team, which is in a hurry to get those average times down.

Khan is focused on supporting the small and medium-sized enterprises crucial to the nation’s progression. At the end of June, its SME loan portfolio was worth Tug1 trillion, or about $370 million. The potential for growth in Mongolia is obvious – and Khan is the obvious beneficiary.

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Best corporate and investment bank: Trade and Development Bank of Mongolia

Orkhon Onon, TDB

In 2020, Trade and Development Bank of Mongolia will celebrate both a birthday and a milestone. As the nation’s oldest bank turns 30, its trajectory also speaks to the growing sophistication of a financial sector that has had a decidedly rocky few years. It is only just over two years since a small army of IMF staffers pounced on Ulaanbaatar to remind investors about the risks of boom-and-bust cycles – and the dire need to diversify away from mining.

TDB is doing just that in ways that augur well for Mongolia’s post-IMF bailout future. Long known as a premier private bank, TDB has spent the last few years pivoting toward the nation’s biggest companies. For that restructuring, chief executive Orkhon Onon has relied heavily on Randolph Koppa as executive vice-chairman. Kopp has spent decades working in 11 nations around the globe for names such as ING Barings.

The bank’s battle-tested leadership has served it well during the turbulence of recent years. Even as the global trade war slams China and the commodity exports that drive Mongolia’s 6%-plus growth, TDB, the nation’s top corporate bank, has been extending credit and managing risk.

The bank’s interest revenues from corporate clients rose 4.3% in the latest fiscal year.

TDB has long put efficiency and quality over size. While it is only Mongolia’s fourth-biggest bank in terms of staff – 1,800 at the last count – it handles 58% of all trade finance and 85% of international remittances. It boasts the nation’s highest revenue per employee ratio.

Even its headquarters is a bit of local focal point, featuring a giant television screen over several stories that shows financial news in the centre of downtown Ulaanbaatar.

TDB spent much of 2019, Koppa says, expanding its already considerable relationships with foreign banks. It currently has more than 200 links with overseas correspondent institutions.

These ties have never been more vital to Mongolia as the trade war upends demand for coal and copper.

Even as TDB diversifies its portfolio, deepening its financing of companies involved in retail goods, food and construction, it is ensuring key sectors from mining to energy to transport thrive and support macroeconomic stability.

And as Ulaanbaatar’s young stock market adds more listed companies, no name seems better positioned to benefit than TDB.

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Best private bank: Trade and Development Bank of Mongolia

Any objective look at the economic landscape in Mongolia suggests it is a place where private banking shouldn’t exist, much less thrive. It has long been an esoteric pursuit in a frontier market that lacks a deep stream of affluent customers. Per-capita income is all of $4,100.

And yet, Trade and Development Bank of Mongolia has made an impressive go of it year after year, easily winning our award for best private bank. In 2004, it pioneered an onshore industry servicing those with assets exceeding $200,000.

Others quickly caught on, with Golomt Bank, XacBank and others jumping on the private banking bandwagon.

With more than 20% of the market, TDB still leads the pack. Its VIP suites in downtown Ulaanbaatar – including in the swanky and buzzy Shangri-La complex – are pulling in new business. They are ideal spots to host invitation-only events for top wealth-management clients, as well as prospective new ones.

More important is what comes next. The nation’s millennials and Generation Z ranks are among Asia’s most wired. They’re coming of age amid a tech unicorn arms race in east Asia, including in neighbouring China.

As the ranks of young Mongolian innovators grow, so in theory will their net worth and need for private banking services. TDB is expanding its outreach to younger Mongolians by offering risk-management lessons.

TDB is also following the old-economy money. There’s growing optimism that the presidential election in 2020 will see record stimulus pumped into the economy. That could be a boon for well-positioned executives working in construction, energy, retail goods, transportation and wholesaling.

There’s speculation, too, that pre-election jostling will break a few bureaucratic logjams; a key one is the listing of Mongolia’s prize mine.

Talk is that president Battulga Khaltmaa wants to alter the perception that the government is incapable of turning Mongolia’s mineral wealth into an economic boom.

If any bank is positioned to service the winners of that initial public offering, it is TDB.

TDB’s slogan – ‘Your success, our pride’ – works both ways, of course. The better its current and future clients do in an economy on the move, the more TDB’s bottom line benefits too.

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Best digital bank: LendMN

Boldbaatar Ochirsuren, LendMN

It’s hard to think of any four-year-old company that’s shaken up Mongolia’s financial sector more than LendMN. The fintech sensation’s start in 2015 is the stuff of legend: Anar Chinbaatar and two similarly successful friends – including chief executive Boldbaatar Ochirsuren – became so tired of buddies asking to borrow cash that they figured: why not make the dynamic official?

What started as a kind of digital payday lender has since morphed into a microlending powerhouse with designs on cornering the payments game. LendMN’s steady growth is forcing the nation’s biggest and oldest banks to raise their own digital offerings – as any good startup should.

But chief financial officer Delgerjargal Bayarjargal says LendMN is just getting started, and in ways sure to benefit the Mongolian economy. Already, it has pivoted from pioneer to market leader, with more than 656,000 registered users, over 2.1 million microloans issued and at least $164 million of loans disbursed so far. Its Wallet app, arguably Mongolia’s answer to China’s ubiquitous AliPay, has over 294,000 users, with 3,600 merchants.

With 21 mobile apps and counting, users can borrow, shop, plan vacations and even make donations.

As Bayarjargal explains, LendMN is also making a big push into supply-chain financing to simplify interactions between small and medium-sized companies and suppliers. It is expanding its remittances services, which so far can be used to move money to 13 nations in Asia. It also has forged partnerships with Facebook Messenger and Viber to offer new services and products.

Perhaps LendMN’s biggest disruption is to Mongolia’s archaic and bureaucratic lending practices. Mongolia’s credit-scoring system is woefully underdeveloped, a big drawback considering the prevalence of itinerant herders.

Traditionally, banks have been reluctant to share data on customer transaction history. Loans tend to involve plenty of paperwork, face multi-day lags and labyrinthine collateral assessment norms, hence the preponderance of loan sharks across the nation.

LendMN’s proprietary credit assessment process, powered by artificial intelligence, has been a game-changer. Its repayment rate, after all, is better than 99%.

There’s no telling where LendMN might venture next. Suffice it to say, though, Mongolia’s entire banking system will likely have no choice but to follow.

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Best bank for SMEs: TransBank

Otgonbayar Munkhtogoo, TransBank

Since October 2016, Otgonbayar Munkhtogoo, chief executive of TransBank, has cut an aggressive figure in Ulaanbaatar financial circles.

Yet as he and his management seek to move up the rankings from seventh biggest by equity, the plan is to think small.

TransBank is positioning itself as the bank of choice for the small to medium-sized enterprises Mongolia needs to nurture if it is going to evolve beyond an over-reliance on commodities.

Between October 2018 and September 2019, TransBank issued 56 SME loans of notable size to 42 borrowers. The total amount (of a mere $73 million) won’t sound like much to global bankers, but there is scope for growth.

The biggest area of focus over the last year has been trade, at more than 28% of the SME portfolio.

After that, in descending order, mining, consumer services, transport, construction, hotels, management services and electricity.

In the year ahead, Otgonbayar wants SMEs to account for 80% of the bank’s total loan portfolio. As of the third quarter of 2019, SMEs accounted for 44% of all loans.

The reason TransBank walks away with this year’s award is because of where that portfolio is aimed: at female entrepreneurs and sustainable businesses. From October 2018 to September 2019, the bank provided 31.7% of all large loans to female-run businesses – 17 in total.

TransBank is responding to global research showing that nations and companies that best cultivate and utilize female talent are the most innovative, productive and inclusive. What better way to bolster bank profits than by supporting the diversification of the economy’s growth engines?

The same goes for making a real contribution to Ulaanbaatar’s need to improve air quality. So far, just 7% of TransBank’s overall SME portfolio is dedicated to entrepreneurs providing sustainable solutions. That’s going to change markedly in 2020, Otgonbayar says. Talk about cleaning up.

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Best bank for CSR: Arig Bank

Naranbaatar Radnaa, Arig Bank

If ever there was a bank that wore its mission statement on its proverbial forehead, it’s the one over which Naranbaatar Radnaa presides. All it takes is walking through the front door of the bank’s modest Ulaanbaatar headquarters to see that sustainability permeates everything Arig does.

The lobby furniture and the Calder-esque chandeliers are made from recyclable plastic bottles. The reception staff’s uniforms are constructed of recycled materials. There’s even an energy-monitoring control room.

But the real story is the roof, which is covered with 42 solar panels. Standing in the background, just one block away, are giant coal-fired smokestacks billowing out the black smoke that pollutes Mongolia’s capital city.

“This is my daily reminder of what we do here,” says Narantsetseg Jamiyan, Arig’s chief operating officer.

The look downstairs is plenty instructive, too. Arig’s headquarters feels more like a Silicon Valley startup than a 22-year-old lender. Wooden floors, cement walls, open-air offices, ping-pong tables and quotes from famous innovators decorating the walls, from visionaries as varied as Bill Gates, Elon Musk and Salvador Dali.

Arig’s chosen Dali quote – ‘Don’t be afraid to be different’ – really does seem to be the bank’s raison d’être. Its ever-growing commitment to financing the low-carbon projects the nation desperately needs makes Arig yet again a shoo-in for the corporate social responsibility award.

So-called green loans are becoming an ever-bigger part of its overall portfolio. Arig, Narantsetseg says, is focusing more attention on lending to entrepreneurs looking to lower Mongolia’s carbon footprint and diversify the economy away from the fossil fuels driving a bull market in face masks. Of particular interest is supporting projects that bring clean drinking water to all corners of the country.

But Arig is an interesting study of a bank passionate about a job that is typically the purview of governments: teaching financial literacy. It runs a sprawling ‘ger kindergarten’ network of courses given to young Mongolians in the traditional tents that nomadic tribes made famous.

Shareholders love Arig’s outreach to the bank customers of tomorrow. Mongolia’s central government, though, should be thanking Arig for playing a key role in helping to spread the benefits of economic growth far beyond the shopping plazas and high-rise apartments of the capital.

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