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Proparco and Khan Bank partner to advance climate finance and support rural businesses in Mongolia
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On the sidelines of UNCCD COP17 in Ulaanbaatar, Proparco signed its third operation with Khan Bank, providing a USD 50 million senior loan to accelerate climate investment and expand access to finance for small and medium-sized enterprises in rural areas. As Mongolia's largest commercial bank, with the country's most extensive banking network, Khan Bank is uniquely positioned to channel long-term financing to underserved communities and support sustainable economic development nationwide.
Under the facility, 60% of the financing—equivalent to USD 30 million—will be allocated to projects contributing to climate change mitigation and adaptation. The remaining 40%, or USD 20 million, will support SMEs operating in rural provinces where poverty levels exceed the national average. The operation will help address two major development challenges facing Mongolia: supporting the transition towards a more climate-resilient economy and reducing economic disparities between Ulaanbaatar and the country’s rural areas.
Achieving these objectives requires long-term financing, which remains scarce in Mongolia’s financial sector. By providing such funding, the operation will enable Khan Bank to finance investments with longer maturities than those typically available through domestic funding sources alone.
Accelerating climate investment
The climate component of the credit line will primarily finance mitigation projects, including renewable energy, energy efficiency and sustainable buildings. These investments are particularly important in Mongolia, where reducing reliance on coal, improving energy efficiency and expanding clean energy are key to reducing emissions and air pollution. It may also support adaptation projects, particularly in the agricultural sector. Eligible investments include sustainable livestock practices designed to limit overgrazing, land degradation and desertification—issues that are particularly important in Mongolia’s climate-vulnerable rural economy.
The financing supports Mongolia’s national climate commitments, including its objective of reducing greenhouse gas emissions by 30.3% below the business-as-usual scenario by 2035. It is also aligned with the country’s sustainable finance roadmap, which aims for green loans to represent 10% of banking sector’s total loan portfolio by 2030.
Khan Bank has incorporated this objective into its core business strategy and has developed significant expertise in sustainable finance and sustainability.
Supporting economic activity beyond Ulaanbaatar
Through its extensive national network of 535 branches, Khan Bank will use the ruralSME component to expand access to finance in ten of Mongolia’s underservedrural provinces where poverty levels remain above the national average, manyof which continue to face limited access to long-term financing despite theirstrong entrepreneurial potential.
By strengthening economic activity in rural areas, the operation is expected tocontribute to more balanced regional development and support thediversification of an economy that remains highly concentrated in Ulaanbaatarand dependent on the mining sector.