Banking in Mongolia

Banking is the life blood of any economy especially a fast growing one like Mongolia.

As the vast new natural resource wealth filters through the general economy, it will create more government spending, more job opportunities, better infrastructure and greater demand for loans and more sophisticated financial services.

There are 14 banks in Mongolia and the sector is growing rapidly. The key players are Khan Bank of Mongolia, Golomt Bank, Trade Development Bank of Mongolia and Xac Banks. High economic growth and the multiplier effect of the natural resources boom in the country is creating a host of opportunities for banks in Mongolia.

According to World Bank, lending is expanding at a healthy pace in order to utilize the strong influx of deposits. According to Bank of Mongolia on January 20, 2012 total savings increased in 2011 by 41% year-on-year and reached MNT 3.89 trillion. 75% of savings are MNT and 25 % are in foreign currency.

Legend of annual changes in savings chart from Bank of Mongolia.

(Vertical axis – per cent, Black line – total savings, Green line – MNT savings, Red line- foreign currency savings)

Further, according to Bank of Mongolia,

Citizens MNT savings increased 41% yoy in 2011 or by MNT 751 billion

Corporate MNT savings increased 96% yoy or by MNT 160 billion

FC savings increased 30% or by MNT 223 billion

According to Bank of Mongolia, weighted average interest of securities of Central Bank in December 2011 have increased 3.3 percentage points yoy and reached 14.25%. Weighted average interest for MNT loans declined 2.4 points and became 15.5%. Weighted average interest of foreign currency loans declined 0.5 points yoy and became 12.1%. Weighted average interest on MNT savings declined by 0.2 points and became 10.5%. Weighted average interest of foreign currency savings increased by 0.5 points and become 4.5%.

According to National Statistics Office of Mongolia on January 13, 2012

¨ Loans outstanding at the end 2011, amounted to 5641.1 bln.tog, by 2376.4 bln.tog or 72.8 percent compared to the previous year.

¨ Principals in arrears at the end of 2011 reached 73.7 bln.tog reflecting decreases 16.9 bln.tog or 18.7 percent compared to the previous year.

¨ At the end of 2011, the non-performing loans in the banking system reached 330.0 bln.tog, showing decreases of 44.4 bln.tog or 11.9 percent compared to the previous year.