The European Bank for Reconstruction and Development (EBRD) is providing Mongolia’s Khan Bank with a €45mn credit line, to increase access to finance for smaller businesses.

The financing package will consist of three loans. The first loan, of €27mn, will be used to support micro, small, and medium-sized enterprises. The second loan, of €13.5mn, will be used for value-chain financing while the third loan, of €4.5mn, will be used for sustainable energy improvements.

Khan Bank will on-lend the funding to its clients.

The bank will also benefit from a €250,000 technical co-operation programme funded by the EU’s Asia Investment Facility.

Irina Kravchenko, EBRD head of Mongolia, says: “We are very pleased to be providing these new opportunities for small businesses in partnership with Khan Bank, one of Mongolia’s largest commercial banks, which provides access to finance in even the most remote areas. We consider projects such as these to be among our strategic priorities in Mongolia.”

In order to become more resilient, Mongolia’s economy needs to reduce its dependence on large enterprises and develop more small and medium-sized companies. In order to do this, particularly in remote and rural areas, businesses are in need of more access to long-term funding.

The EBRD’s credit line to Khan Bank aims to address this issue while also providing funding for businesses that are part of value chains of larger contractors, and suppliers.

The credit line will also help companies reduce their energy consumption. This is an issue in Mongolia, where the average energy intensity per capita is more than double that of other EBRD countries of operations and carbon intensity per capita is three times higher.

Over 90% of total primary energy supply comes from coal and oil, with most electricity and heating generated by ageing coal-fired plants. The loan will help companies switch to more energy efficient technologies and will be provided under the EBRD’s Mongolian Sustainable Energy Financing Facility.