The Standing Committee on the Economy and the Subcommittee
for SME Development yesterday held a joint discussion on the present and future
status of SMEs. The head of the Standing Committee, D.Zorigt, later answered our
journalist’s questions about the discussion.

How effective has the Government policy been? Is it true
to say that many of the programs have had little result?

The Government has been spending more and more on supporting SMEs in the last
two years. The sub committee has received requests for loans totaling MNT900
billion and more are coming. But capital allocated from the state budget is not
enough to meet this demand. That is why we set up a working group to identify
new capital sources and have asked the Government to sell bonds to put money not
only into the wool and cashmere sector but also into the milk and the meat
sectors. The group has talked with the Government, the Ministries of Finance
and of Food, Agriculture and Light Industry and definite results would be
achieved.

What has been achieved in the SME sector since 2008?

Loans have been given to 3,300 organizations and their projects have generated 18,000
jobs. Processing units, animal-based products, agriculture, and building
material sectors have received a boost. The committee plans to carry the work
farther.

How about repayment and what are the usual loan terms?

MNT14 billion of the total loans of MNT28 billion have been repaid until the
end of April. The repaid amount is then issued as fresh loans to SMEs. The
Government has an agreement with commercial banks which issue loans at their
risk, and so have their own rates and criteria.

Is it possible to set a maximum limit on how much interest
banks can charge?

We are considering how interests on SME loans can be reduced. In 2009, we fixed
the rate of interest at 1% monthly, but last year reduced it to 0.8% for some
types of loan.

Can the term of borrowing be extended?

The subcommittee feels loans can be given for five years at between 6% and 8% annual
interest.

How has the problem of collaterals been solved?

There is no easy solution, particularly as banks insist on guarantees and
pledges according to their requirements. Some MPs have prepared a draft law to
set up a loan guarantee fund and will submit it to Parliament soon. The draft
wants loans to be granted on the basis of the borrower’s financial status,
experience and skill. It also identifies definite sources for the guarantee fund.