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Spools of thread and stacks of fabric in all possible shades and colors add a bright touch to Bulgan Lkhagvatsend’s tailoring store. She keeps her scissors and needles handy to catch up with the orders, not a moment to waste. Bulgan sews traditional Mongolian costumes mainly for the traders of Narantuul Trade Center, the country’s largest market.

In the last two decades, Blugan has had her share of good and bad. But earlier this year, when Mongolia took rigorous measures to prevent the spread of COVID-19, Bulgan had to shut down her shop in Mongolia’s capital, Ulaanbaatar. Something told her this time was different.

Confirming her fears, the global pandemic put Mongolia’s trade and economy under unprecedented pressure, and small businesses were hit the hardest. Soon, Bulgan had to temporarily lay off her two of her three workers.

Luckily, Bulgan’s customers stood by her. So did Transcapital LLC, Mongolia’s largest microfinance institution. Eventually, she managed to beat the market downturn, at a time when most businesses were facing a serious income loss.

She recalls, “My customers kept coming back to buy traditional clothes, my specialty, while referring me to their friends. One of my customers even arranged an order for 2,000 face masks.” Bulgan adds with a sense of pride, “Our quality products, which capture our passion in every seam, create loyal customers.”

Building capacity and improving skills

Weathering the impact of a global pandemic takes financial and business resilience. A strong partnership with Transcapital prepared Bulgan for difficult times.

In 2015, she started having trouble with her equipment, which was old and impacting the quality of her work. Bulgan desperately needed money to upgrade and expand her business. Unfortunately, given her existing mortgage loans and the size of her business, banks were hesitant to give her a loan.

Workers in Mongolia’s capital Ulaanbaatar streets. Mongolia.
Workers in Mongolia’s capital Ulaanbaatar streets. Mongolia. Photo: Dave Lawrence/World Bank

Just when she was at her tether’s end, a financial advisor from Transcapital visited her. After looking at her repayment capacity and potential revenue generation, he quickly issued a loan of 2 million tugrik (just over $700). Unlike commercial banks, Transcapital takes the unique features of micro businesses into account when making a lending decision. For instance, many banks require official records, but Transcapital accepts handwritten accounting books to assess a borrower’s credibility.

Though a small amount, the loan helped Bulgan to buy a high-quality sewing machine and ample supplies at a low cost. She could then focus on improving the quality of her precision sewing. Soon, her income more than doubled and she managed to hire three more women.

In addition to funding, Transcapital equips small business owners with training. This helped Bulgan learn about the benefits of proper financial management and the possibility of having low-cost financing by repaying her loans on time. She also learned new ways to calculate costs and prices to ensure both quality and liquidity.


A resilient recovery for a better future

In Mongolia, lack of financing and capacity are key barriers for small business owners to grow and expand their businesses. The ongoing pandemic has further exacerbated the situation.

In response, IFC launched a series of strategic efforts to support Mongolian businesses since the outbreak. The latest initiative is an innovative Mongolia Tugrik (MNT)-denominated loan facility to Transcapital, which will ultimately benefit more than 15,000 micro and rural entrepreneurs.

“IFC’s innovative financing will allow us to expand our support to Mongolian micro and small enterprises while contributing to the nation’s effort to rebound from the COVID-19 crisis,” said Altanzul Zorigt, CEO, Transcapital.

The facility includes a three-year loan of about MNT 8.4 billion (about $3 million) from IFC’s own account and a syndicated loan of about MNT 25.2 billion (about $9 million) from impact investment funds. They include Invest in Visions GmbH, as arranged by German research agency, Agents for Impact GmbH and Co. KG, as well as BlueOrchard Finance Ltd.’s Microfinance Initiative for Asia, ACTIAM and Developing World Markets.

“This is the first time IFC has invested in a non-banking financial institution in Mongolia. This is also our first local currency syndication in the country. The financing signals our strong commitment to helping Mongolian enterprises in the recovery and rebuilding process in the wake of COVID-19,” said Rufat Alimardanov, IFC’s Resident Representative for Mongolia.

Image: In the district of Bayanchandmani soum in the province of Tuv aimag , Mongolia. Photo: Khasar Sandag / World Bank


In its dealings around the globe, IFC works with microfinance institutions like Transcapital LLC to incorporate responsible finance practices into all aspects of business operations, including training, capacity building, and risk management, with actions to help protect borrowers and guard against indebtedness.

Meanwhile, Bulgan is ready for the future. For now, she is busy looking for convenient accommodation for her three employees—all single moms—to save commute time. The workplace can also be another major challenge for small-scale garment businesses, given high rental costs. She notes that rental support from the government for entrepreneurs like herself will enable them to make better and more affordable products.

The support for Transcapital is part of IFC’s COVID-19 response program, which aims to protect businesses and jobs in developing countries, especially those in the most challenging markets. As it delivers its pandemic response, IFC is working to ensure that financing goes to the poor and vulnerable. In addition to financing, IFC also increased trade line limits for its partner banks in Mongolia earlier this year under its $2 billion fast-track trade-finance envelope.

Published in November 2020