Mongolia is opening its door to foreign banks for the first time to support its developing banking sector, the country’s finance minister said.

The move will ensure the stability of the banking sector, “increasing access to finance and ensuring sustainable growth of the banking sector,” Finance Minister Javkhlan Bold said.

The resource-dependent economy is looking to introduce foreign commercial bank branches after the Mongolian parliament approved new monetary policy guidelines last month. Previously, the country of 3.4 million only permitted representative offices of foreign commercial banks that can’t provide banking services.

Bank of China Ltd and Industrial and Commercial Bank of China Limited have representative offices in Mongolia. Japan’s MUFG Bank Ltd and Sumitomo Mitsui Banking Corp had such offices in the country but they closed down in recent years, according to Mongolian Bankers Association.

The change can bring foreign currency liquidity and more lending opportunity to the northeast Asian country sandwiched between Russia and China.

Mongolia is looking to attract foreign investment as the economy faces the highest inflation rate in North Asia. With a tight monetary policy, Mongolia slowed inflation to 8.6% in November from a high of 16.9% in June 2022.

The Bank of Mongolia this month said it would maintain a policy rate of 13% ahead of expected growth in government spending and slowdown in China, its top trade partner.

The Mongolian central bank said 12 banks and 513 non-bank financial institutions operated in the country as of 2022.