XacBank

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XacBank

Corporate Logo
Corporate Logo
Formation 2001
Purpose/focus Banking
Headquarters Ulaanbaatar, Mongolia
Chairman
CEO		 Ganbold Chuluun
Ganhuyag Ch. Hutagt
Website www.xacbank.mn

XacBank, based in Ulaanbaatar, is one of Mongolia’s most profitable banks. In 2007, the Bank made a net income of MNT2.9 billion after taxes and had assets of MNT143.4 billion. Its total loan portfolio reached MNT101.9 billion. Currently, the bank serves over 224,000 customer accounts.[1]

Contents

[edit] Corporate History

[edit] Formation

XacBank headquarters located in Ulaanbaatar.
XacBank headquarters located in Ulaanbaatar.

Founded in 2001, XacBank was established as a result of a merger between the two largest non-bank financial institutions (NBFI) in Mongolia, Goviin Ehlel LLC and XAC LLC. Originally, the NBFIs operated in separate areas and served different sectors (SME loans vs. microloans).[2]

[edit] Growth

In 2003, XacBank opened five new branch offices, making it the third Mongolian bank to have a nationwide presence. In 2003, 21 branches (65 percent of all branches) were located in each of Mongolia’s 21 aimags. The clients served at these branches formed 62 percent of XacBank’s total clients.[3]

However, XacBank needs to improve its management information system equipment, among other things. XacBank has had numerous issues with its loan tracking system, Bankers Realm, and as a result, has deemed it no longer appropriate for future needs. The Bank is currently looking at forming a long-term IT plan, which includes building its own systems preferred by management. Other problems include staff turnover and staff productivity.[4]

[edit] Corporate Products

[edit] Loans

Currently, XacBank offers 14 different types of loans and 7 different types of savings products.[5]

By the end of the 2007 fiscal year, XacBank disbursed 105,723 loans. Although its micro loan portfolio has increased to MNT25.158 million (up from MNT19.197 million in 2006), micro-loan borrowers have decreased to 16,834 from 18,550. The average micro loan now in 2007 nearly tripled to MNT1,494,000 from MNT460,000 in 2006. Likewise, the average SME loan has increased to MNT25,268 (up from MNT23,993).[6]

[edit] Rural Products and Services

Facing increasing competition and the pressure to demonstrate its commitment to serving communities that lack access to financial services, XacBank is expanding to rural areas. However, although the majority of the rural population live in the soum centers, branches, with the exception of three large soums, are generally established in aimag centers, due to limited economies of scale, high transaction costs, technical difficulties, and lack of qualified employees to serve as staff. Typically, to remain solvent a branch needs to operate in an area with a population of at least 10 to 20 thousand; however, the average soum population is 2500. To further expand its services, XacBank has began to experiment with various projects.[7]

XacBank considered the idea of a franchise model to reach clients in soums. The Bank believed that the most feasible method to reach such clients was to use local savings and credit cooperatives (SCCs) as its franchisees. By doing this, they could use branch offices found in the aimag centers to monitor and supervise the SCCs and not have to establish branch offices in these areas. However, start up costs were high and a pilot program demonstrated that the model would not break-even in the short run. As a result, mobile banking is being used with the intent to eventually introduce franchising.[8]

The Bank has started a mobile banking program that has reached 137 of the total soums in Mongolia. Typically, the mobile bank crew consists of a driver and two credit officers (one for micro credit and one for SME loans) who travel to a soum center from the aimag once or twice per month. The crew then meets with the Loan Approval Committee (LAC) members, who are responsible for monitoring loan performance, collecting late repayments, and receiving loan applications, among other things. Together, the bank crew and the LAC members review the loan applications, make a final decision, and disburse the loans. While there, the crew members also collect repayments. However, because the crew only visits the soum once or twice a month, this can only be viewed as a temporary strategy.[9] The Bank still intends to develop a soum-based Savings and Credit Cooperative (SCC) that, other than technical and operational support from XacBank, is operated by the local community.[10]

In May 2008, the Technology Program of CGAP (Consultative Group to Assist the Poor) announced that it is providing technical assistance and funding for a mobile phone banking project. By providing banking services on mobile phones, XacBank will be able to assist approximately forty percent of Mongolians who use only cash.[11] A problem might with the program is that the Bank's telecommunication providers are not guarantors of client's information, thus exposing clients to the risk of financial fraud. However, new mobile phone banking software is making it possible to encrypt transaction information.[12]

Demonstrating its commitment to focus on rural markets, XacBank piloted an agricultural lending program in 2002 in six aimags and disbursed loans ranging from USD 42.5 – 12,755, which were largely used for agriculture.[13]

As of 2003, herders account for only 1.4 percent of all borrowers; loans for livestock account for only 0.8 percent of the Bank’s total portfolio.[14] In June 2003, under IFAD’s Rural Poverty program, XacBank, in conjunction with the Government of Mongolia, began to disburse loans specifically targeted at Arhangay, Bulgan, Huvsgul and Hentiy aimags, which are primarily agricultural and livestock breeding areas. The 2,435 loans totaled USD 1615.64.[15]

[edit] References

  1. ↑ XacBank 2007 Annual Report. Retrieved on 2008-07-05.
  2. ↑ XacBank. XacBank History. Retrieved on 2008-07-08.
  3. ↑ Hishigsuren, Gaamaa. 2006. Information and Communication Technology and Microfinance: Options for Mongolia. Asian Development Bank. Retrieved on 2008-07-22.
  4. ↑ Lai, Minh-Huy & Levard, Isabelle. XacBank: Mongolia-August 2006, Planet Rating: The Global Microfinance Rating Agency, August 2006. Retrieved on 2008-07-08.
  5. ↑ XacBank. XacBank History. Retrieved on 2008-07-08.
  6. ↑ XacBank 2007 Annual Report. Retrieved on 2008-07-05.
  7. ↑ Hishigsuren, Gaamaa
  8. ↑ Hishigsuren, Gaamaa
  9. ↑ Hishigsuren, Gaamaa
  10. ↑ XacBank. XacBank History. Retrieved on 2008-07-07.
  11. ↑ "Mobile Phone Banking for Rural Mongolians: XacBank Selected as CGAP Technology Partner," XacBank (2008-05-31). Retrieved on 2008-07-21.
  12. ↑ Hagen, Ingrid, ed. (2007-10-30)"Nomadic Banking: Interview with XacBank CEO Ganhuyag Chuluun Hutagt." UPsides no. 4. Retrieved on 2008-07-31.
  13. ↑ Hishigsuren, Gaamaa
  14. ↑ Hishigsuren, Gaamaa
  15. ↑ Hishigsuren, Gaamaa

[edit] External links

XacBank Homepage

Retrieved from "http://mongoliacenter.org/monreference/index.php/XacBank"
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