Module 8 - Mongolia: Technological Innovation Serving Rural Areas (Khan Bank of Mongolia)

The Khan Bank of Mongolia is an institution best described by superlatives. It is the leading provider of financial services to rural Mongolia. It was named “Best Bank in Mongolia for three consecutive years (most recently in 2006) for its achievements as a leading financial institution delivering innovative financial services to all Mongolians. One of the Bank’s greatest assets is its branch network, comprising 394 points of service, which is much more extensive than that of any other bank operating in the country. The branch network effectively reaches 98 percent of rural communities and one out of every two Mongolian households.

Of Khan Bank’s 394 offices, more than 150 are fully interconnected through satellite antenna, fiber optic cable, or wireless modem. The network improves their competitiveness through efficient, low-cost transaction processing and accounting and delivers their rapidly developing electronic and card banking products in real time. Over 65 percent of loans and 85 percent of deposits are handled over this network. Additionally, Khan Bank has been utilizing solar and wind power in over 100 rural branches in areas where electricity is either unavailable or too sporadic to be reliable. With this technological innovation, the Bank was able to introduce its “Express Micro” loans, which are ideally suited for traders and small businesses and are approved and disbursed within one to two days for qualifying customers. Mongolian government agencies and companies with a need for countrywide reach to the rural population utilize Khan Bank’s network to deliver services.

Khan Bank offers debit cards to cross-border traders traveling to China to minimize the risk of carrying cash over long distances. Khan Bank now operates through the Agriculture Bank of China to enable its debit cards to be used at ATMs and point of sale devices, enabling cashless travel and reducing Khan Bank’s risk of theft-related default. The bank is planning to offer the reverse opportunity for Chinese traders.

Recently, Khan Bank and a local telecom provider started a nationwide upgrade to deliver internet and telecommunication access at rural level. LMI/Mongolia will work with Khan Bank and the telecom provider to build the rural phone network. For this activity, Khan Bank’s local branches will serve as hubs for providing point, multipoint wireless connectivity to the district town and surrounding baghs. They will be using an innovative VoIP solution (“rural telco in a box”) in conjunction with the telecom network at the Khan Bank branches to provide rural and remote locations with low-cost local and international telecom services. In providing rural telecom access, Khan Bank is actively supporting telecom policy and regulatory reform efforts undertaken by Mongolia’s information and communication technology agency and the World Bank.