Ulaanbaatar, Mongolia, August 10, 2006.
Mongolia has officially adopted a new law on financial leasing. The law, developed with the support of IFC’s Leasing Development Project, facilitates an important new financing mechanism for small and medium enterprises, helping raise income levels and stimulate job creation.
The new law complements the country’s civil code by providing a definition that distinguishes between financial leasing and similar contractual relationships, enabling the introduction of leasing-related tax amendments. Revised VAT and corporate income tax laws, including several favorable articles for financial leasing, have also been adopted and will go into effect on January 1, 2007. The leasing law clarifies what type of assets may be leased; the rights and duties of the parties, in particular those of the vendor; and addresses the issue of repossession. The law will benefit Mongolian small and medium enterprises, which often lack collateral and thus cannot obtain long-term loans to purchase equipment.
“The leasing law is a powerful tool that can help transform Mongolia from a supplier of raw materials into a manufacturer of end products. Leasing provides a new method of financing that will can help small and medium enterprises improve production by modernizing their equipment, thereby helping create new jobs and raise income levels,” said Mr. Gankhuyag Davaajav, Chairman of the Parliamentary Working Group on Financial Leasing.
The new law was developed with the support of an IFC technical assistance project to promote leasing in Mongolia, which was officially launched in March 2005 and is supported by the Japanese government. The project draws on IFC’s extensive experience in leasing development programs in several countries of the former Soviet Union. It provides training and consulting services to small and medium enterprises, who will be the beneficiaries of a well-developed financial leasing sector, as well as to financial intermediaries and the Mongolian government.
Leasing in Mongolia is in its initial stage of development, but growing fast as financial intermediaries position themselves to take advantage of the new legislation. In 2005 the total value of leasing was $10.7 million, an increase of 40.2 percent over 2004. Banks recorded an increase of 813 percent on their outstanding lease portfolio in 2005, while nonbank financial institutions reported an increase of 200 percent.
About IFC
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit
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