Country Case Study – Agricultural Bank of Mongolia
The Agricultural Bank of Mongolia (Ag Bank) is the main provider of financial services in the rural areas of Mongolia. It has the largest branch network in the country with 356 locations and provides deposit and loan products in each location. Although in receivership in 1999 and facing possible liquidation, this former state bank has been completely turned around and was privatized through international tender to a major Japanese company in March 2003. Turnaround efforts have resulted in the Bank disbursing more than 500,000 loans to date while maintaining an arrears rate consistently below 1 percent and becoming the second most profitable bank in Mongolia. This turnaround identified and mobilized the strengths of an existing institution to rapidly disseminate desperately needed financial services to the rural areas as well as protect access to the few existing financial services that many rural Mongolians already relied upon.
This paper describes the results and impact of the reform process, its loan and deposit strategies and the challenges faced during the reform. It concludes with a review of the lessons learned and recommendations for others involved in a similar process. One key lesson learned by Ag Bank was the importance of marketing: focused research, strong brand promotion, and products responsive to customer demand to provide an income stream to sustain the organization. Ag Bank’s managers used a combination of local knowledge from their branch managers, formal market surveys, and experience from working in other developing countries.