Source: Microfinance Focus                      Date: 20 July, 2010

The European Bank for Reconstruction and Development (EBRD) has announced a synthetic loan worth USD8 million in local currency to XacBank for financing micro and small businesses in Mongolia.  XacBank is the second largest microfinance bank in Mongolia, and the EBRD holds approximately ten per cent equity stake in it.

Extended under the EBRD’s Mongolia Financial Sector Framework, the loan will enable XacBank to meet the growing demand for local currency financing and increase further its outreach to entrepreneurs in remote areas. The synthetic local currency loan, the first one provided by the EBRD in Mongolia, will help XacBank increase the term of its local currency funding, and expand its portfolio of loans in MNT. This will enable XacBank’s clients to repay their loans in the same currency as they earn from their operations.

It is envisaged that a technical assistance program will accompany the loan financing to further strengthen the bank’s MSME lending business by providing capacity building and strengthening risk management and internal control practices. “With this transaction and in close cooperation with our partner bank XacBank, the EBRD is deepening its support for Mongolian micro and small enterprise sector which is an essential element for private sector growth in Mongolia.  This local currency facility is the first the EBRD has executed in Mongolia and it will enable XacBank to mitigate the foreign currency exchange risks for its clients”, said the Head of the EBRD Office in Mongolia, Mr. Philip ter Woort.