Owing primarily to extensive investmentin new mining projects, Mongolia's economy is on a pathof very rapid long-term growth. While financialintermediation in Mongolia has been growing fast, access tofinance remains a critical constraint for enterprises, andespecially for Small and Medium Enterprises (SMEs).Improving access to financial services will requirestrengthening the legal and regulatory framework andfinancial infrastructure, including the secured transactionsframework, creditor rights and insolvency regime, creditinformation sharing system, platform for technology-basedbanking products, regulation and supervision of nonbankfinancial institutions, and consumer protection in financialservices. To realize fully its economic potential, Mongolianeeds to build a diversified, efficient and stable financialsystem, capable of intermediating both on a large scale andin specific market segments. Due to its focus on thedevelopment agenda, and specifically on access to financefor the SME sector, capital markets development, and housingfinance market development, this report does not addressfinancial sector stability issues. Financial intermediationin Mongolia has grown significantly in recent years; creditand deposit penetration are on par with the average in theEast Asia and the Pacific (EAP) region. Access to finance isparticularly constrained for SMEs, which are also moresensitive to an unstable macroeconomic environment,characterized by high inflation and exchange rate fluctuations.
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