The European Bank for Reconstruction and Development is to focus its Mongolian investment on the non-natural resource sector.

The announcement comes as part of the development bank’s renewed Mongolian strategy which will hold until 2016 and signals a desire to ensure the rest of the economy isn’t left in the dust of the freewheeling resource and mining sectors.

It was announced last month that Mongolia’s Q2 2013 growth was 14.3%, almost double the figure reported in Q1. Most of this growth stems from the foreign investment in facilities such as the Oyu Tolgoi copper mine – the largest financial undertaking in Mongolian history, which is expected to account for 30% of national GDP by the time it’s fully operational. The first shipments of copper concentrate left the mine in June.

But the head of the EBRD’s Ulaanbaatar office Matthieu Le Blan tells GTR that his team has made a conscious decision to diversify its investment to attempt to maintain some level of balance in Mongolia’s economy. However, he makes clear that the growths of the mining and non-mining sectors aren’t mutually exclusive. Indeed, it will be impossible to have one without the other.

“The business sector in Mongolia has grown rapidly over the last five years,” he explains. “The EBRD has been able to invest in more than 25 companies in Mongolia since 2006. Mongolia has dozens of large diversified groups that are interesting targets for investors, in particular at a time when valuations are reasonable. The economy has been growing very quickly, GDP per capita in US dollar terms more than doubled over the last three years and growth is expected to remain in high, provided the Oyu Tolgoi project remains on track. This creates exciting growth and investment opportunities.”

At the heart of the EBRD’s strategy is the support of Mongolian SMEs, which it hopes to do through forging partnerships with local banks and financial institutions. Earlier in September, it made its first loan to a microfinance company – a US$1mn credit line to Trans Capital, provided in Mongolian tugrug.

Also this month, it announced a partnership with the Bank of Mongolia, designed to increase local-currency lending and issued a loan of US$25mn to Khan Bank – one of Mongolia’s largest commercial banks – to lend to small businesses in the agriculture and manufacturing sectors.

Speaking of the EBRD’s support of Mongolia’s banking sector, Le Blan says: “The banking sector in Mongolia is not fully developed and requires more capital, better corporate governance and strong supervision. That said, local commercial banks finance a much diversified portfolio, and non-mining sector is well represented. Given depressed commodity prices, banks are looking at agriculture, manufacturing projects more and more.”