The International Finance Corporation (IFC), the private sector arm of the World Bank, has agreed to provide a financing package of US$3mn to Agricultural Bank of Mongolia, one of country’s major financial institutions.



The investment encourages the development of a stronger private banking sector and industry best practices through the recently privatised institution.
IFC will provide a US$1.2mn equity investment along with a US$1.8mn term loan to help strengthen AgBank’s capital base and expand the bank’s operations in support of productive micro and small businesses, herders and small agricultural enterprises in rural areas across Mongolia. Also, Development Alternatives, which has managed Agricultural Bank of Mongolia since 2000, will invest US$300,000 in new common stock.


“There is an urgent need to strengthen Mongolia’s financial institutions in order to support private sector development and to ensure the provision of banking services to the small and medium businesses and microenterprises, which have traditionally lacked access to such products. As a multilateral development institution, IFC is very pleased to help promote banking reform and modernization in Mongolia,” says Javed Hamid, regional director for East Asia and the Pacific.


Karin Finkelston, associate director for China and Mongolia, adds: “Banking reform and modernisation is at the core of IFC’s strategy for promoting private sector development in Mongolia. We hope that our support for the banking sector will help improve its disclosure and transparency, making Mongolian banks more accountable to stakeholders.”


Agbank was established as an independent institution in 1991, being spun off from the rural and agricultural financing operations of the former state monopoly bank. In March 2003, government’s 100% equity interest in AgBank was privatised through a purchase of shares by HS Securities, Japan, through an international tender.


Chairman Hideo Sawada notes: “AgBank now has four shareholders – three strong private companies from Mongolia, Japan and America, and an important multilateral investor, IFC. The diverse experience of these investors and the extended contract with DAI are a strong foundation for the bank’s future growth.”


AgBank CEO J Peter Morrow comments: “We welcome IFC and DAI as new investors in the bank. The capital increase will support our rapid growth, and we look forward to the active support of these prominent international organisations.”