Loan products of KHAN bank designed for Agricultural sector, its complications and solving possibilities Dec 15, 2014

CONTENT 1.Agricultural sector – loan product type of KHAN bank 2.Overview of loans disbursed to Agricultural sector 3.Complicated issues and solving possibilities

To agricultural entrepreneur  Micro loan /Household expenditure and other financial needs /  Working capital loan  Investment loan  Financial leasing 1 ST PART

Special feature of the sector 1.Income – Usually cash income can be received during 6 months per annum. 2.Expense – Expenses are charged during 6months annually.

Special feature of the sector 3.Weather dependency – Too sensitive to drought, high risk 4.Special feature of the competitor – Poor limitation of the import 5.Knowledge and information of loan officers – Insufficient 6.Cash flow – Possibility to combine with deposit

Advantages  Loan disbursement: Loan shall be disbursed partially in accordance with planting, fallowing, harvesting, storing and planned work performance.  “Loan disbursement and repayment schedule” shall be made relating to product sales of agricultural entrepreneur and providing possibility to repay with seasonal featured cash income. For example: Loan repayment can be exempted for not more than 6months per annum.  Concessionary terms can be applied for placing and regular transmission through current/deposit account of the Bank.

Designed for herders  Property purchase loan  Consumer loan  Consumer leasing

Special feature of the sector  Weather dependency – migration with herds, if necessary  Cash flow – No regular income, expenses such as holiday, treatment, training etc are arising  Government organization’s dependency – Sometimes postpones loan disbursement

Advantages  Loan disbursement: Loan analysis is conducted on credibility and loan repayment capacity.  No demand to insure livestock, but emphasizes loan disbursement to herders with insurance.  “Loan disbursement and repayment schedule” shall be made relating to agricultural product sales and providing possibility to repay with seasonal featured cash income.  Guidance is delivered for each loan disbursement.

Demand Agricultural loan – during planting and harvesting, Herder loan – during Tsagaan sar, spring delivery, graduation ceremony, Naadam, autumn school gathering, 2 ND PART

Main complications in funding Complications  Fund term, expense  Lack of information  Insurance system  Other difficulties (collateral, guarantee, etc) Possibility Project and program development for herders and agricultural entrepreneurs by Government Loan guarantee fund International loan with concessionary terms 3 RD PART

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