Presentation: Micro pension project Mongolia

Micro pension project XacBank, Mongolia

The Hague, January 26, 2011 Joep Schouten & Boudewijn Sterk

Agenda • • • • • • • •

Origin of project Objective technical mission Impression Mongolia Impression XacBank Current pension system XacBank’s motives Set-up (micro) pensioen systeem Current state of affairs

Origin project micro pension Mongolia • • • • •

Acquisition through mixmarket.org (Sept 2009) Interest from XacBank (Dec 2009) Desk research validity (Jan – April 2010) Meeting with CEO XacBank (May 2010) Technical mission Mongolia (June 2010)

Objective technical mission • Getting acquainted with XacBank • Focus on socio-economic conditions • Meeting with 20+ experts: EBRD, GTZ, ADB, UNDP, WB Ministries, Banks, Insurers, NGOs

Impression Mongolia (1)

Impression Mongolia (2) Population: Size: History:

Climate: Economy: Revenue: Society:

3,04 mil (1,7 persons per square km) 1.565.000 square km (3x the size of France) -until 1911 under Chinese reign Âť from 1911 to 1990 under Soviet influence Âť democracy since 1990 Extreme winter (up to -50 C), short summer (30 C) GDP per capita 3.200 US$ (2009) 36,1% of population lives under poverty line (2003) Mining, agriculture, herding, kasjmir Individualistic, family oriented, strong distrust regarding government.

Impression XacBank (1) •4th bank of Mongolia, market share 4.6% (2008); •Excellent reputation, national and international; •60% of branches in rural areas •Mission: contribute to sustainable development of Mongolia •Innovative projects: -mobile banking -housing -clean stoves

Impression XacBank (2) - Products BUSINESS LOAN

RURAL LOAN

CONSUMPTION LOAN

OTHER LOAN

Start-Up

Herder

Household

Wholesale

Growth

Herder group

Salary

Deposit backed

Development SME

Crop

Overdraft

Apartment pledged

Group loan

Housing Student

Mortgage Leasing

Impression XacBank (3) - Partners

Current pension system Mongolia (1) Born before 1960 -Soviet pension, height of premium depends on labor history -pension age woman 50, man 55 -financed from 11% social security premium

Born after 1960 -Introduced in 1999, ‘deferred drawing rights’ -on top of 11% social security comes 7% pension premium -height premium based on balance individual account, divided by the life expectancy

Current pension system Mongolia (2) • • • • • •

Not mandatory 2nd pillar pension scheme 3rd pillar pension scheme not available Current (increasing) life expectancy: M 63,7 / V 70 No social allowances for informal sector No provision of funds, pay-as-you-go Mongolian people sceptical about pension accumulation government • Huge interest for private pension

Objective XacBank • To be the first to implement a micro pension product in Mongolia, aimed at rich and poor (micro) clients • Join current savings products (short term) • Cooperation with other banks no problem, as long as lead is with XacBank

Advice (micro) pension provision development -DC System -Individual accounts -Co-operation necessary (distribution) -Product implementation to short time horizon Mongolian people -Extern party manages funds; sustainable investment is key -Small difference in premium per income group -Break even: after 6 – 7 years

Current situation: • Project plan submitted (September 2010) • At the request of XacBank market research proposal (november 2010 submitted) to test economic premises • Reorganisation XacBank (Januari 2011) • Wait till spring (april 2011)

Continuation micro pension project Challenges: • How to keep the project going?

• How to keep commitment?

• How to reach decission making?

• How to secure financing the project?