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Non-Bank Financial institutions

Since about 2000, Mongolia's economic and financial markets have become more connected with the those of other countries; and the interest of foreign investors has increased significantly. Accordingly, it has become increasingly necessary to provide integrated management of financial regulation, and establish a unified supervisory system.

Non-bank financial institutions (NBFIs) are commercial (for-profit) organizations, licensed by the Financial Regulatory Commission (FRC) to conduct foreign exchange trading, settlement and remittance activities, in addition to lending using their own funds.

According to Paragraph 7.1 of the Law on Non-Bank Financial Activities, ‘non-bank financial activities’ include the following:

  • credit,
  • factoring services (purchasing others’ receivables),
  • issuance of payment guarantees,
  • issuance of tangible and intangible payment instruments (such as payment cards and electronic money),
  • electronic payment services
  • money transfers,
  • foreign exchange trading,
  • trust services,
  • investment in short-term financial instruments,
  • investment and financial information/advice,
  • financial intermediation activities.

A revised draft of the Law on Non-Bank Financial Activities was drafted and made ready to be submitted to Parliament. The draft law seeks to:

  • reduce the number of licenses,
  • empower sectoral participants,
  • diversify and increase access to financial products and services,
  • support the stock market and technologybased finance regulation (to reduce interest rates and protect the interests of investors and customers) by creating service increasing consumer loans.

FRC Resolution No. 495 of 2020 approved the Regulation on Regulation and Supervision of Non-Bank Financial Foreign Exchange Trading and established a procedure to connect NBFIs (engaged in foreign exchange trading) to the State electronic payment system. Also, the government information exchangesystem ‘KHUR’can be used free of charge to provide services quickly, provide e-documents, and accurately deliver and monitor customer information to the Financial Intelligence Unit.

FRC Resolution No. 998 of 2020 re-approved the procedure for classification of activities of non-bank financial institutions, the establishment and the disbursement of active risk fund. In this context, the classification name should be in accordance with international standards, and repayment made within 30 days of the date due. After payment, there is a chance to register in the normal category, and reduce risks that protect the interests of borrowers.

Nationwide, there were 532 licensed NBFIs with a total of 295 branches. The majority (85.5%) of NBFIs operated in Ulaanbaatar.

5.5% of all NBFIs had foreign investment, and 94.5% had national investment.

Assets of NBFIs: In 2020, the total assets of NBFIs reached MNT2.0trillion

Revenue from products and services:  In 2020, the total income of NBFIs reached MNT408.8 billion.

Cost of products and services: Most (92.3%) were operating expenses, 1.7% were non-operating expenses and 6.0% were income tax expenses.

Currency trading news: In 2020, NBFIs purchased a total of MNT1.6 trillion worth of currency and sold MNT1.5 trillion worth. The Chinese yuan accouned for 46.9% of the currency purchased and 46.8% of the currency sold.

 

Fintech:

 In 2020, 93.5% of loans with a term of up to one year (issued by NBFIs) were issued through mobile-based loan services.

Supervision:

The Questionnaire for Assessing the Risk of Money Laundering and Terrorist Financing and Proliferation of Weapons and Mass Destruction was submitted electronically to a total of 538 NBFIs and monitored.

Function:

Improve non-bank financial activities, strategic policies, laws and regulations for market development, conduct microfinance market research, increase access to financial services and issue licenses and rights related to non-bank financial activities perform the following functions:

In the field of registration and permission of NBFIs:

  • Promptly organize activities related to licensing and create conditions to serve investors and clients in a transparent and open manner;
  • If necessary, cooperate in obtaining professional opinions, comments and other forms from the relevant authorities on specific issues;
  • Analyze and resolve compliance with the applicant's documents and legislation

In the field of policy, regulation and development of NBFIs:

  • Conduct consolidated research and reports of NBFIs and issue conclusions;
  • To determine the conditions and requirements for the operation of the loan guarantee fund;
  • To organize training and seminars in cooperation with other departments in the field of nonbank financial activities and cooperate with relevant organizations