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Digital transformation is going successfully by Tsevegjav Gumenjav

Mr. Tsevegjav Gumenjav’s, CEO of XacBank, interview with Mongolian Economy magazine for 95th anniversary of the establishment of Mongolia’s banking sector.

-What are the advantages and disadvantages of Mongolia’s banking and financial sector?

-First of all, I would like to congratulate the officials of the Bank of Mongolia on the 95th anniversary of the establishment of Mongolia’s banking sector.

I would like to emphasize three main advantages of today’s financial sector in Mongolia. First, the financial service is becoming stronger and its sufficiency is improving. The current economic growth is the result of continuous flow and expansion of the financial service. Second, governance and risk management have been improving in the recent years. In 16 of the last 28 years, Mongolia faced economic difficulties, sometimes even crisis. During this time, 25 banks were liquidated, merged or re-established. In such an unpleasant macroeconomic environment, it was crucial to establish an internationally recognized governance and risk management standard that would minimize risks and set up the basic foundation to run the banking and financial sector.

Although the banking and financial organizations could be different from one another, compared to its state 10 years ago, governance and risk management wise the sector has improved in terms of recognizing the tendencies of the business environment, introducing business plans, implementing necessary changes and adjustments. It is now able to adapt to the economic situations such as slow growth or certain crisis, which means the sector, on certain levels, became immune to unforeseen changes and will continue with its routines and operations. Third, in order to reach international standards Mongolia’s banking and financial organizations are investing actively in technologies, products, service qualities and standards that are used business operations. These are world standard investments. Although the advantages mentioned above are present in Mongolia, more needs to be done to improve and eliminate the existing disadvantages.

Due to the short span of the economic and financial cycle, high inflation, unstable currency ratio of MNT to USD and high dependence from the mining sector, Mongolia’s banking sector as well as private businesses face certain difficulties in mid or long-term business planning process, which often do not go as planned. These macroeconomic factors impose high cost on financial resources. This business module (implementing short term business plan from high cost financial resources) will not last for the long run. For that reason, lowering financial intermediary cost, extending business cycle is important.

Also, in Mongolia there are too many entities that offer intermediary purposed financial services. They are all very different from each other in terms of governance, capacity and sustainability. This is one of the reasons why the cost of intermediary services, loan interest financed from a small capacity market where savings quantity is low. Due to the of lack of equal supervision and regulation standards, the issues related to protecting customers, preventing market distortion, thus creating unfair competition have always been one of the common problems.

Read the full interview here.

Courtesy of XacBank.

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