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IFC Supports Mongolia’s Secured Transactions Reform, Expanding Access to Credit for Smaller Businesses


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Jing Yu

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Hannfried von Hindenburg

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Ulaanbaatar, Mongolia, March 25, 2014—IFC, a member of the World Bank Group, has signed a cooperation agreement with Mongolia’s Ministry of Justice to help reform the country’s secured transactions system, a move that aims to unlock affordable financing for micro, small, and medium enterprises, and help them grow.

Access to finance is a challenge faced by many smaller Mongolian businesses, which struggle to get bank loans as they do not own land or buildings that can be easily accepted as collateral. Because of the lack of a centralized registry system and functioning laws, banks are reluctant to take movable assets, such as accounts receivable, inventory, and equipment, as collateral. The reform will pave the way for Mongolian lenders to provide movable-asset financing to smaller businesses.


“Supporting small and medium enterprise development is one of the government’s top priorities,” said Bayartsetseg Jigmiddash State Secretary, Ministry of Justice of Mongolia. “With IFC’s help, we will be able to build a modern secured transactions system, which is a critical financial infrastructure that helps small businesses expand and create jobs.”


IFC and the Ministry of Justice will collaborate to establish a proper legal framework for secured transactions through a new Pledge Law, develop an online registry, and work with the Mongolian Bankers Association to raise awareness and train industry professionals. This new project in Mongolia is carried out in partnership with Japan’s Ministry of Finance, the Swiss State Secretariat for Economic Affairs, and the Canada Department of Foreign Affairs, Trade and Development.


“As proven in other countries, the project will unlock affordable financing for many smaller Mongolian businesses that cannot use movable assets as collateral,” said Tuyen D. Nguyen, IFC’s Resident Representative in Mongolia. “IFC will continue to draw on global best practices to support the Mongolian government’s reform efforts toward financial inclusion and sustainable growth.”


Previously, IFC has helped develop modern secured financing systems in more than 20 emerging markets including China, Ghana, and Vietnam. In China alone, more than $3 trillion in loans backed by movable assets as security have been granted between 2007 and 2011 and many of the beneficiaries are small businesses.


In addition to investments across multiple sectors in Mongolia, IFC’s Advisory Services Program has worked closely with the Mongolian government to support the development of company law and corporate governance, food safety law, investment law, sustainable banking, and business inspection and permit reforms.


About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in more than 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and promote shared prosperity. In FY13, our investments climbed to an all-time high of nearly $25 billion, leveraging the power of the private sector to create jobs and tackle the world’s most pressing development challenges. For more information, visit
www.ifc.org.
 
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