2012年-世界发展银行全球_Financial_Sector_Assessment___Mongolia_18页_1016kb

Financial Sector Assessment of Mongolia (June 2012)

Core Content Overview

This Financial Sector Assessment (FSA) provides an analysis of Mongolia's financial sector, focusing on three key areas: access to financial services (particularly for SMEs), capital markets development, and strengthening the housing finance market. The assessment was conducted by the World Bank mission in January-February 2012 and includes recommendations for policy reforms to enhance financial inclusion, market efficiency, and stability.

Main Findings and Recommendations

1. Macroeconomic Environment and Financial Sector Landscape

• Economic Growth: Mongolia's economy is experiencing rapid long-term growth, primarily driven by investments in mining projects and proximity to Asian markets.
• Growth Prospects: The economy is at risk of overheating due to expansionary fiscal policy, volatile global commodity prices, and rising capital inflows.
• Inflation and Volatility: Consumer price inflation reached 11.1% in 2011, and is expected to remain high in the medium term. The open economy is vulnerable to price and exchange rate volatility.
• Financial Sector Growth: Financial intermediation has grown rapidly since 2007, but remains highly volatile, mirroring the economic cycle.
• Sector Composition: The banking sector dominates the financial system, accounting for 96% of financial assets. The sector is highly concentrated, with the top 3 banks holding 70% of the market share.
• Nonbank Financial Institutions (NBFIs): NBFIs and Savings and Credit Cooperatives (SCCs) are small but could play a crucial role in SME and microenterprise financing, especially during economic downturns.

Recommendations:

• Maintain a stable macroeconomic environment through coordinated fiscal, monetary, and exchange rate policies.
• Strengthen the legal and regulatory framework to support financial intermediation and SME access to finance.
• Improve the capacity of the Financial Regulatory Commission (FRC) and market intermediaries.

2. Access to Financial Services

A. Status of Access to Finance

• Credit and Deposit Penetration: Credit and deposit penetration are comparable to the EAP region average.
• SME Financing Challenges: Access to finance is a major constraint for SMEs, with over 30% of firms perceiving it as their biggest problem.
• Loan Characteristics: SMEs face high interest rates, short-term loan maturities, and limited access to financial instruments like factoring and leasing.
• Leasing and Factoring: Leasing is underdeveloped, with a penetration rate of 2-3%, and factoring is not yet present despite legal allowance.

Recommendations:

• Encourage foreign bank entry to increase competition and provide more sophisticated credit products.
• Revise leasing and factoring laws to support industry development.
• Implement tax incentives and improve financial literacy among SMEs.
• Enhance the capacity of NBFIs and SCCs to support SMEs and microenterprises.

B. Secured Transactions, Insolvency, and Bankruptcy Framework

• Secured Transactions: A modern framework is lacking, with no Pledge Law and limited awareness of movable asset financing.
• Enforcement Challenges: Enforcement of court decisions is weak, with issues in the Bailiff's Office, valuation of immovable assets, and auction irregularities.
• Insolvency and Bankruptcy: The legal framework does not support enterprise restructurings, and procedures are mostly liquidations.

Recommendations:

• Enact a Pledge Law and establish a centralized movable assets registry.
• Finalize an enforcement regime that allows for out-of-court enforcement and streamlines court procedures.
• Amend insolvency legislation to provide favorable tax treatment and support restructuring agreements.

3. Strengthening Capital Markets

• Current State: Capital markets are underdeveloped, with limited institutional investor base and weak regulatory framework.
• Regulatory and Supervisory Gaps: The FRC lacks sufficient resources and capacity to supervise securities markets and NBFIs.
• Government Bond Market: Not well developed and does not provide a benchmark yield curve.
• IPOs and Market Development: A more efficient allocation of regulatory resources is needed, including reliance on market-based pricing mechanisms for IPOs.

Recommendations:

• Enact a new Securities Market Law aligned with international standards (IOSCO).
• Strengthen the FRC's supervisory capacity and legal protection.
• Develop a central repository for corporate bond information.
• Review the suitability of the MSE auction system for government bond issuance and consider a primary dealer system.
• Enhance the quality and reliability of financial information for listed entities.
• Promote the development of the insurance and pensions sectors to attract institutional investors.

4. Strengthening the Housing Finance Market

• Urbanization and Demand: Rapid urbanization is increasing demand for housing, but supply is limited.
• Mortgage Lending: Current mortgage lending is not well aligned with housing supply, risking a real estate bubble.
• Financial Instruments: Limited mortgage funding sources and lack of securitization mechanisms.
• Public Housing Programs: The “100,000 Apartments” program lacks a clear design and implementation strategy, potentially distorting the housing finance market.

Recommendations:

• Adopt a conservative approach to mortgage lending.
• Promote property modernization and support construction through infrastructure development.
• Strengthen the legal framework for mortgage lending and develop mechanisms like real estate investment trusts (REITs).
• Establish a stronger mortgage market liquidity facility for long-term funding.
• Implement a clear strategy for public housing programs, including governance, transparency, and monitoring.

Key Policy Recommendations Summary