Mongolia looks set to become the latest country to benefit from the European Bank of Reconstruction and Development's (EBRD's) Trade Facilitation Programme (TFP), the letter of credit (L/C) based trade finance initiative widely regarded as one of the more successful stories in development banking.

After the ratification by all member countries in June 2006, Mongolia became an EBRD country of operation on 15 October 2006, and on 4 April 2007 the bank announced its strategy for Mongolia, which includes a focus on the TFP as well as a significant emphasis on strengthening the financial sector.

Banking priorities

Support for the financial sector will be a key EBRD priority, since Mongolia currently has only limited access to term finance available for commercial banks and the cost of finance is high.

Thus EBRD wants to strengthen financial intermediation and encourage bank consolidation with the aim of improving access to finance in the country. In pursuit of this aim it plans to provide various forms of credit lines and debt products to commercial banks.

L/C roll out

EBRD says it will "actively roll out the TFP to several banks, as trade finance is in high demand", according to an EBRD summary of its strategy for Mongolia.

The bank says it will also increase financing sources for micro and small enterprises through credit lines to commercial banks and to non-banks, particularly outside the capital.

Equity participation

EBRD says it is also pursuing opportunities for equity participation in banks, which it says will strengthen the local banks' capital base and improve corporate governance.

Active policy dialogue with the Bank of Mongolia will also be pursued by EBRD, which says it wants to focus on improving supervision and encouraging consolidation.

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