IAAC discloses violations in SME Development Fund www.zgm.mn
On the occasion of the upcoming international Anti-Corruption Day, the Independent Authority Against Corruption (IAAC) held a discussion under the theme “Small and Medium-sized Enterprises (SME) Development Fund: Issue and Solution” yesterday. At the discussion, the IAAC disclosed some of the inspection results on SME Development Fund.
A spokesperson of the Bank of Mongolia (BoM) said, "SMEs play significant role in food, agriculture and light industry sector, as well as business activation. For instance, SMEs account for 60,330 out of about 78,000 private entities with active operations. These companies employ 43 percent of total workforce.”
Statistics show that SMEs amount to 17.6 percent of Mongolia’s GDP and 2.3 percent of export. As of today, over 900,000 people are employed by SMEs.
The Government, under the 2016-2020 Platform Program, is implementing both financial and non-financial measures to develop SMEs. As for financial support, the Government granted MNT 835.1 billion worth soft-loans to 7,536 lenders from the SME Development Fund since 2009, as well as MNT 130.6 billion from Local Development Funds to 7,536 borrowers.
On the contrary, the accessibility to SME Development Fund stands at about 20-30 percent according to Deputy CEO of Mongolian National Chamber of Commerce and Industry (MNCCI) Sarandavaa Myanganbuu. “SMEs have to prepare over 30 different documentations from nine Government bodies and go through 36 processes just to draw loan from SME Development Fund. In average, SMEs spend MNT 200,000 - MNT 1.5 million and 33 days just to request a loan. About 60 percent of loan issuers are small loan requesters of up to MNT 100 million.”
Furthermore, Mr. Sarandavaa disclosed that State and ministry officials account for 80 percent of total SME Development Fund loaners. “Previous lessons show that financial support alone is not enough to develop SMEs. They need consultative services that will coordinate their projects with the possibility of success. A study conducted in 2017 that involved over 2,500 SMEs suggested revision to Laws on tax, labor and SMEs. Also, it shows that the current legal environment has the highest pressure on middle-sized enterprises,” addressed Mr. Sarandavaa.
In addition, the IAAC has conducted an inspection on SME Development Found and found five violations, which were disclosed at the discussion. These are:
Granting loans without proper selections;
High-risks on the repayment of granted loans;
Loan issuance to unclear project implementation date;
No penalties to overdue repayments;
Lack of monitoring and accountability.
Participants also highlighted the lack of transparency of information on project loans, which grants more accessibility to people close to the information.