The Mongolian Borrowers Union (MBU) reported that the nation’s commercial banks have refused to lower interest rates for loans following the delivery of a letter demanding lower rates for borrowers.
In early May, the MBU submitted letters to Khas Bank, Golomt Bank, Khan Bank, Arig Bank, Trade and Development Bank, and State Bank of Mongolia calling for lowering the interest rates of loans currently at 15 percent annual interest or higher, and evaluating collateralized assets in accordance with market prices. The MBU believes that commercial banks use loan agreements that are too one-sided and protect only the rights of banks. The union asked the commercial banks to make changes to loan agreements to be mutually beneficial for lenders and borrowers.
Head of the MBU Ts.Solongo said that Khan Bank and Arig Bank responded saying that they were unable to meet the request, while Khas Bank reportedly accused the MBU of instigating public unrest.
The MBU says that they are now going to send letters to MPs demanding lower interest rates for loans through legislation.
Ts.Solongo said, “There isn’t any free competition among banks, and we can conclude that they are operating just for profit. If there was free competition, one out of these six banks could have lowered interest rates for loans. The government is only involving targeted groups in programs for lowering interest rates and in the low income housing programs. But all Mongolians have to have equal rights, and above all, the state should support businesses and the workers.”
“Only banks are operating with profits during this economic recession. Borrowers pay banks around 15 percent in annual interest. According to our research, commercial banks see a net profit that ranges from 20 billion to 300 billion MNT per year. Because they are taking away the apartments and other collateralized properties of citizens if borrowers are not able to repay their debts, they will never work with a deficit. That’s why they should cut interest rates for loans,” Ts.Solongo said.
The MBU said that there are nearly 700,000 borrowers that have taken out loans as of January 2016, and the number of delinquent borrowers has increased by 32.8 percent in comparison to the same period in 2015. They believe that as the government has managed to lower the interest rate of loans for herders from 29 to 10 percent, interest rates for other loans can also be lowered.