EBRD and EU promote SME lending in Mongolia

The European Bank for Reconstruction and Development (EBRD) and the European Union (EU) are joining forces to stimulate lending to micro, small and medium-sized enterprises (MSMEs) in Mongolia through a new financing product, according to a press release published on 17 September 2026. The initiative introduces a portfolio risk-sharing framework, under which the EBRD will provide an unfunded guarantee of up to €25 million (US$ 29 million) on certain loans issued by XacBank, one of the country’s major lenders. XacBank becomes the first financial institution in Mongolia to partner with the EBRD on this framework. The arrangement is designed to expand access to finance for domestic businesses. It marks a new milestone in EBRD–EU cooperation in the country.

Under the framework, the EBRD will cover up to 50 per cent of XacBank’s credit risk on newly issued MSME loans. The portfolio risk-sharing framework is one of the EBRD’s main financing structures dedicated to supporting and developing local private companies. Through it, the Bank offers partner banks funded or unfunded risk participation mechanisms in foreign or local currency. These operate by co-financing and guaranteeing partner banks’ loans to eligible companies. The mechanism aims to broaden lending capacity in local markets.

The loans will support the working-capital needs of domestic businesses, helping them to expand and improve their operations. Eligible sub-borrowers will also receive EU-funded technical assistance under the EBRD’s Advice for Small Businesses programme. The deal will facilitate the development of MSME-earmarked structured finance in Mongolia. It combines financial support with advisory services for small businesses. Together, these components target both capital access and business capacity.

The project will benefit from a €2.25 million guarantee provided by the EU through its European Fund for Sustainable Development Plus. This contribution will help to mitigate financial risks associated with lending to small businesses in order to promote economic growth in the country. The EU’s role complements the EBRD’s guarantee under the risk-sharing framework. Together, the two institutions are structuring a layered risk mitigation approach. The joint effort underscores their shared commitment to Mongolia’s private sector development.

Over the past two decades, the EBRD has financed 172 projects worth a total of US$ 3.2 billion (€2.8 billion) in various sectors of Mongolia’s economy. Ninety per cent of the Bank’s loans in the country have been extended to private companies. This makes the EBRD the largest lender to Mongolia’s private sector among the international financial institutions. The new framework builds on this long-standing engagement. It reinforces the Bank’s focus on private sector-led growth in Mongolia.