Microfinance as an Effective Development Solution: The Case of Mongolia

Microfinance is increasingly looked at as a development solution for countries around the world. Its development and practice in former communist countries, however, has been relatively unexplored. This study seeks to fill this gap by asking how the practice and operation of microfinance in Mongolia compare to global best practices. Using global best practice frameworks regarding regulatory and organizational environments for microfinance, data gathered from surveys and onsite training observations at Xacbank is used to assess Mongolia\u27s financial sector and its relative compliance to said practices. The analysis helps address the question of whether microfinance has helped or hindered Mongolian economic development. I find that while Mongolia\u27s formal and informal social and regulatory environment compares relatively well to global best practice frameworks, the adoption of microfinance and growth of the microfinancial sector has led to unanticipated broad level institutional changes in Mongolia\u27s financial regulatory sector that are conducive to economic development. Despite such changes, improvements in the country regulatory and business context still need to be made to _ make Mongolia more attractive to foreign investors and domestic entrepreneurs. Ideas for further research include determining other possible events or movements that could have impacted financial industry reform, the effect of the global financial environment on the Mongolia, and the advancement of microfinance and the financial industry in other transitioning economies