LOAN GUARANTEE PROGRAM

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					                   LOAN GUARANTEE PROGRAM
Introduction
Mercy Corps Mongolia established a Loan Guarantee Mechanism (LGM) in 2004 as part of its Rural
Agribusiness Support Program. Rural agribusinesses experience difficulties accessing credit due to their lack of
collateral. The LGM assists them to obtain commercial loans through provision of additional cash collateral. The
LGM is a component of program activities being implemented for rural economic development with the funding
received from the U.S.Department of Agriculture. This financing activity is not direct lending to business clients
but rather the provision of "additional cash collateral" for commercial loans to rural businesses, that lack of
needed collateral. Since September 2008 Local Business Development Service providers (BDS) are
implementing loan guarantee mechanism.

Objectives
   1. To support small rural businesses to improve their financial capacity in order to implement their
       business ideas, start and/or expand and/or diversify their business activities
   2. To strengthen the relationship between rural businesses and financial institutions, and to build capacity
       of clients to access to financial resources and use them for business purpose
   3. To increase competition among financial institutions to promote improved availability and accessibility
       of financial services for rural businesses and influence on condition of services they offer.

Geographical area
Twelve aimags including Arkhangai, Bayankhongor, Gobi-Altai, Gobisumber, Dornogobi, Dundgobi,
Umnugobi, Uvurhangai, Suhbaatar, Hovd, Zavhan, Uvs




Clients
Small, medium and large businesses making significant contributions to the Mongolian agricultural sector
Partner banks
ХасBank, Khan bank, Post bank


Loan Guarantee Methodology
   1. Rural Businesses develop a business plan with technical assistance from independent BDS providers.
      The plan allows the Business, Banks and Mercy Corps to identify the opportunities, risks involved and
      financial investment needs of the Business.
   2. Mercy Corps reviews the business plan and if the business plan is considered viable for implementation,
      a formal letter with approval of additional cash collateral will be submitted to the Bank selected by the
      business.
   3. The Business presents its plan to the bank, who in turn underwrite the loan and make an offer to lend.
      The business negotiates the loan terms and conditions with the bank.
   4. The bank conducts normal underwriting procedures, values the business's collateral, and then makes a
      formal loan offer.
   5. If there is a shortfall in collateral required, Mercy Corps deposits an amount equal to the difference
      between the loan amount and value of the collateral provided by the business into an interest-bearing
      account at the bank’s head office.
   6. In the event of default, the bank first recovers the value of collateral from the business and then recovers
      the deficit, if any, from the Mercy Corps cash collateral account.


Results
    To date as a result of LGM implementation, 1558 rural agribusinesses have accessed commercial loans
        worth MNT 5.5 billion; MC has provided MNT 2.2 billion as additional cash collateral.
    The repayment rate is 97.37% with 4.49% of loan collateral at risk by the end of 2009 (over 1 month late
        repayments).

                            BUSINESS DEVELOPMENT SERVICE PROVIDERS

"Medlegiin suljee" NGO                                  "Business new idea extention center" NGO
Erdenebulgan soum, Arkhangai aimag                      5th bagh, governor's office building ,
Phone: (01332) 22997, Fax: (01332) 22997                Arvaiheer,Uvurhangai aimag
Contact person: T.Hongorzul                             Contact person: Z.Bayarsaihan
Mobile:      95846365                                   Mobile:            99833894
E-mail:       thistlemn@yahoo.com                       Е mail:             bayarsaikhanz@yahoo.com
"Rural women development support fund" NGO              "Tasraltgui alham" NGO
Vocational training school building, Bayanhongor        7th bagh, "Mongol Daatgal" LLC building, Baruun-Urt
soum, Bayanhongor aimag                                 soum, Suhbaatar aimag
Phone:               (01442) 22699                      Contact person: N.Naranchimeg
Contact person: Sh.Chimgee                              Mobile:            99519795
Mobile :             99442166                           E-mail:            naraa9795@yahoo.com
"Altai Swiss fund" NGO                                  "HAANT" NGO
Yesunbulag soum, Govi-Altai aimag                       2-th bagh, Baruun-Urt soum, Suhbaatar aimag
Phone: (01482) 24761 Fax: (01482) 24761                 Contact person: O. Duurenbileg
Contact person:            Ch. Tsetsegmaa               Mobile:           99082336
Mobile:                   99482068                      Е mail:           duuren_haant@yahoo.com
E-Mail:                   tsetsegsdc@mongol.net
"Bolor mungun muchir" LLC                               "Ehlel Hovd" NGO
Sumber soum, Govisumber aimag                           Jargalan bagh, Hovd institute building, Jargalant soum,
Phone:                   98549911                       Hovd aimag
Contact person:      B. Tsetsgee                        Contact person:          N.Enkhtur - 88436868
Mobile-                  98540110                                                 Z.Oyungerel - 99434628
E-mail:                  tsetseg0610@yahoo.com          E-mail:                   n_enkhtur@yahoo.com
"Dundgobi Hugjil sanaachlaga" NGO                       "Bat Itgel" NGO
Saintsagaan soum, Dundgobi aimag                    Jargalan bagh, Jargalant soum, Hovd aimag
Mobile:            01592-23751                      Contact person: B.Bat-Ochir - 99439574
Contact person: B.Oyuntsetseg                                               B.Amartuvshin - 95229070
E-mail :           du_initiative@mail.mn            E-mail:                 b_amar65@yahoo.com
Employer's association                              "Za bagana" NGO
Sainshand soum, 1st bagh, Dornogobi aimag           Uliastai soum Zavhan aimag
Contact person: D.Tumurtogoo                        Contact person: J.Norolhoojav
Mobile -          99795438                          Mobile:               99469501
E-mail:           rasp_dg@mongol.net                E-mail:               noyo_od@yahoo.com
Herder's Bayantsagaan association NGO               "Vet association" NGO
Post bank building, Bayantsagaan soum, Dundgovi     Uliastai soum, Zavhan aimag
aimag                                               Contact person: B.Mendbileg
Contact person: Ts. Gerel                           Mobile:                99466885
Mobile:          99597770, 99204985                 E-mail:                bmendbileg@yahoo.com
"Success formula" NGO                               "Sain tus" NGO
Gunii us LLC building, Dalanzadgad soum,            4th bagh, Shine zuun LLC building, Ulaangom soum,
Umnugovi aimag                                      Uvs aimag
Contact person: B. Enkhtuya                         Phone:              01452-24428,
Phone:               01-532- 22093.                 Mobile:           9945-9639, 50459639
Mobile: 99820148, 88530404, 99539814                Contact person: D.Togtoh
                                                    E-mail:         togtokh_d@yahoo.com
"Vet association" NGO                               "Agriculture cooperative association" NGO
Yesunbulag soum, Govi-Altai aimag                   Dalanzadgad soum, Umnugovi aimag



Contact Information

Country Director Dominic Graham (e-mail: dgraham@mercycorps.org.mn)
Technical advisor U. Erdenebileg (e-mail: erdenebileg@mercycorps.org.mn)
Program officer D. Unenbat (e-mail: unenbat@mercycorps.org.mn)

Address: Bayanzurkh district, 24 Peace Avenue, Ulaanbaatar, Mongolia
Phone: 976-11-461145 Fax: 976-11-461048

Website: www.mercycorps.org.mn

				
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