Khan bank – The agricutural bank of Mongolia

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Introduction

Today, the Agricultural Bank of Mongolia, now known as Khan Bank, is an institution best described by superlatives. It is the leading provider of financial services to rural Mongolia (with the largest rural branch network), one of the largest taxpayers in Mongolia, and the most profitable of the 16 major Mongolian Bank, based on return on equity. But just five years ago, Ag Bank was in receivership and facing possible liquidation after more than a decade of political interference, mismanagement, loan losses, and numerous brushes with in solvency. Many in the international community felt the bank could never operate sustainable and should be closed. However, the Ag Bank’s role in providing crucial financial services to Mongolia’s vast rural areas meant that closing it would have had a catastrophic impact on the rural economy and the economy as a whole. Instead, an enlightened partnership between the Government of Mongolia (GoM) and the donor community recognized and leveraged the Bank’s latten assets, namely its extensive rural branch network franchise and corresponding access to a large and underserved market. Ag Bank’s subsequent rapid turnaround and successful privatization highlights the potential of commercially-oriented microfinance to transform even the most trouble state-owned banks into sustainable providers of financial services while also maintaining rural outreach.