Two reports released by the World Bank highlight recommendations to enhance Mongolia's financial and private sectors. The reports acknowledge Mongolia's reform efforts and climate commitments but emphasize the need for better policy coordination and implementation among agencies for optimal results.
"Creating a more efficient financial sector and a supportive environment for private investment can offer Mongolia significant development opportunities," stated Taehyun Lee, World Bank Country Manager for Mongolia. "A strategic, well-coordinated approach that aligns with sectoral policies will help the country achieve a more diversified, equitable, and resilient development."
The first report, Building the Foundations for Financial Sector Development, outlines comprehensive reforms to address vulnerabilities in Mongolia's banking sector and improve market development. It suggests steps policymakers could take to reform the legal and judicial system and strengthen the central bank. This would facilitate easier credit extension to the private sector, which has decreased from 60 percent of GDP in 2013 to 41 percent in 2022. The reluctance of banks to take risks is attributed to the high concentration of Mongolia’s banking system, where the top three banks hold about 80 percent of assets.
The report highlights the importance of strengthening the independence, governance, and oversight of the Bank of Mongolia. It calls for better sharing of credit information; improved enforcement of contracts through judicial decisions; and out-of-court workouts. Additionally, it suggests restarting the government securities issuance program to create a liquid market for domestic government securities, crucial for developing the domestic capital market and improving the foreign exchange market.
The second report, Boosting Mongolia’s Private Sector and Green Competitiveness, proposes policy actions to enhance productivity and private investment outside the mining sector. It recommends making regulations more predictable by reducing bureaucracy through digitalization; improving SME capabilities through quality certification and technology adoption; and supporting public-private efforts to attract investment in renewable energy, energy-efficient production, and sustainable agribusiness.