The Mongolian economy has grown veryrapidly following the discovery of significant mineraldeposits. Large investments in the mining sector have led toincreased capital inflows, resulting in cheap externalfunding for banks and rapid credit expansion. Loans tohouseholds increased at the staggering pace of 80 percentfrom 2010 to 2011, despite Mongolia’s history of bankingcrises. Loans to Small and medium sized enterprises (SMEs)have increased by some 65 percent in the same year. Althoughover 78 percent of adult Mongolians have accounts at formalfinancial institutions and over 61 percent have debit cards- far exceeding the average in the East Asia and Pacificregion - in many respects the legal and regulatory frameworkand enforcement have not kept pace with the expansion oflending. Some important segments of the financial sector,such as securities and insurance, are still lagging due tolow consumer awareness and low levels of savings. A numberof reforms have been introduced to expand the financialservices market but it is clear that consumer protection andfinancial literacy need to be addressed in a more systematicway. This World Bank’s diagnostic review provides a detailedassessment of the institutional, legal, and regulatoryframework in three segments of the financial sector:banking, securities, and insurance. Volume I summarizes thekey findings and recommendations of the review and Volume IIpresents a detailed assessment of each financial segmentcompared to the Good Practices for Financial Consumer Protection.
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