Ulaanbaatar, December 17, 2014—Mongolia’s
small and medium enterprises (SMEs) say limited access to finance is their
biggest stumbling block to growth, with women-owned SMEs facing particular
difficulties, according to a report released today by IFC, a member of
the World Bank Group.
More than 95 percent of SME executives
interviewed need loans. Their total credit gap is 9,022 billion Mongolia
tugrik ($5 billion). One quarter of that demand is from women-owned SMEs,
which account for almost 40 percent of companies in Mongolia. The country’s
credit information system does not currently cover a significant number
of SMEs, limiting banks’ access to their credit histories. While
60 percent of the SMEs that participated in the survey do have access to
bank loans, many complained that the loan size was smaller than what they
needed to grow their businesses.
“Unmet demand for financing is impeding
the growth of small and medium enterprises, which account for 98 percent
of Mongolia’s companies, and employ 52 percent of the workforce,” said
Rachel Freeman, IFC’s Manager for Financial Institutions Advisory in Asia.
“This represents a huge opportunity for financial institutions and commercial
banks in particular.”
The report, entitled “SMEs
and Women-Owned SMEs in Mongolia,”
was funded by the Canadian government and highlights key trends, challenges,
and opportunities for SMEs in three areas: enabling environment, supply
and demand prospects for financial and non-financial services, and demand
for and access to finance, with a particular focus on women-owned businesses.
“The government of Canada has been
a leader in promoting the full participation of women in all social and
economic activities,” said Nancy Foster, Development Consular at the Canadian
Embassy in Mongolia. “Through this project with IFC, we aim to further
empower Mongolian women as entrepreneurs and leaders, supporting inclusive
and sustainable economic growth in the country.”
While men and women face difficulties
in accessing finance, the situation is more challenging for women. Despite
making up 57 percent of the workforce, Mongolian women are widely perceived
as being less likely than men to own assets that are accepted as collateral,
making banks hesitant to loan them money – even though women have higher
payback rates than their male counterparts.
Both men and women cite collateral requirements
as the biggest challenge in applying for loans and
their assets were often under-valued.
But women, who often shoulder the burden of family and household care,
are more reluctant than men to apply for bank loans, citing long processing
times for loan applications and in dealing with government officials.
IFC has started to implement a SME Banking
Program in Mongolia to increase access to finance for SMEs in partnership
with Mongolian financial institutions. The program includes a focus on
women-owned SMEs, leveraging IFC’s Women in Business program to enhance
the standing of women as a profitable customer segment for banks and help
improve access to finance for SMEs in general and women entrepreneurs in
IFC, a member of the World Bank Group,
is the largest global development institution focused exclusively on the
private sector. Working with private enterprises in about 100 countries,
we use our capital, expertise, and influence to help eliminate extreme
poverty and boost shared prosperity. In FY14, we provided more than $22
billion in financing to improve lives in developing countries and tackle
the most urgent challenges of development. For more information, visit