Building the Foundations for Financial Sector Development in Mongolia

Overview & Synopsis

The financial sector has a core role to play in increasing investments and supporting enterprise growth and entrepreneurship in non-mining productive sectors in Mongolia. This study endeavors to identify and make recommendations that will address structural impediments in the financial sector, thereby encouraging investment in productive enterprises. It champions a holistic approach to transforming the financial system, aligning it with the economic transformation goals of the new recovery policy (NRP) and Vision 2050 as well as the climate agenda, while emphasizing the connection between enhancing the functioning of financial markets and promoting greater private investment. Financial deepening has been held back by macroeconomic instability and limited structural economic transformation. Against the background of sustained socioeconomic progress and improved quality of life, little has changed in the structure of financial intermediation in Mongolia since 2012. The financial sector faces several obstacles hindering it from playing a significant role in advancing access to climate finance. t is recommended that the authorities replace the Credit Guarantee Fund of Mongolia (CGFM), the current partial credit guarantee fund, with an institution with a broader mandate that, in addition to partial credit guarantees, includes domestic trade credit, export credit insurance, and climate finance risk coverage.