World Bank President Praises Mongolia Bank

XacBank has received a loan from the IFC to support microcredit lending in Mongolia. Among XacBank's clients are pastorial herders. Photo: Mercy Corps

The International Finance Corporation—the private sector lending arm of the World Bank Group is providing a $400,000 loan to Mongolia's XacBank, marking IFC's first investment in Mongolia's financial sector. The loan will also help to bring badly needed credit to the country's microentrepreneurs, and small and medium enterprises.

"IFC sees an urgent need to strengthen Mongolia's financial institutions to support private sector development and provide small businesses and micro enterprises with access to banking services," said World Bank President James Wolfensohn at the signing ceremony in Ulan Bator on May 21, 2002.

"We also support XacBank's strategy to reach the poor and under-served communities in Mongolia."

In 1999, Mercy Corps formed a for-profit, non-bank lending institution to meet the credit needs of the Gobi region. Goviin Ekhlel - "Gobi Start" - helped finance the working capital and fixed assets needed in retail trades, light industry, transportation, agriculture, and manufacturing. Clients consisted of small and medium sized business enterprises, as well as pastoral herders who required a unique loan structure tailored specifically to their seasonal needs.

Mercy Corps initiated a strategic merger between Goviin Ekhlel and XAC in summer 2001, leading to the creation of XacBank.

Previously, Mongolians had very limited access to financial services, especially in poor rural areas. XacBank’s mission is to provide a broader array of choices to clients in locations that lack access to formal banking and credit services. Sixty-five percent of XacBank's clients reside in rural areas and more than 70 percent are women.

"As the [Mongolian] Government works to finalize its poverty reduction strategy and put it into action, it will be important to encourage the private sector as an engine of growth. I am pleased with the work being done on small and medium-sized enterprises and on microcredit. IFC's loan to XacBank will make an important contribution to this work", Wolfensohn said.

For more information, visit the World Bank Web site.