Interview with Dr. V.Danaasuren, Lecturer, Department of Economics and Finance, Academy of Management. I heard that the epidemic has affected the economy, including manufacturing, the banking sector, and bank lending. Should we start with the question of exactly how the plague has affected businesses?

As for the COVID-19 epidemic, it affects not only our country's economy but also the world economy. 70-80 percent of companies registered in Mongolia are engaged in retail and wholesale trade. In terms of trade, it is a matter of selling imported goods to the Mongolian market. In that sense, the border was closed for about a year, which affected the trade sector. In addition, as soon as the border was closed, there was a problem for domestic companies that utilize imported raw materials. As a result, there was a shortage of imported raw materials and rising commodity prices. On top of that, the cost of producers' products has risen. There are few people who can afford to buy expensive products. Citizens are buyers on the one hand and employees of factories and companies on the other. Due to the lockdown, factories were closed and all but pharmacies, food factories and grocery stores were closed. Companies that had their activities restricted have been forced to lay off workers. Some who did not go for layoffs provided unpaid leave to their employees. In the case of enterprises, the main costs are wages and raw materials. As people began to spend money only on everyday consumer goods, consumption of other goods was cut and sales declined. As a result, production has shrunk due to declining raw materials, rising costs, and declining product sales.

It will be difficult for businesses to obtain loans from banks due to difficulties in their operations. As a result, the amount of loans provided to small and medium enterprises has sharply decreased. Would you like to share your research results?

According to research, the demand for loans from small and medium enterprises has declined. At the end of 2020, loans to small and medium-sized businesses and enterprises decreased by 30-40 percent compared to the same period of the previous year. For small and medium enterprises, 2020 was a year of downsizing, so they almost stopped getting investment loans. Only small amounts of working capital loans were applied for. However, the demand for that loan has also decreased. This is a sign that small and medium-sized businesses are closing down. It can be understood that the demand for loans at the bank has decreased due to the decrease of operations.

Is the ability of small and medium enterprises to meet the requirements of bank loans also reduced?

The survey results clearly show that the number of small and medium enterprises that meet the bank's requirements has decreased. A survey of bank economists found that small and medium-sized enterprises were no longer able to meet bank collateral requirements.

Collateral has been a problem before. Does that mean it got worse during Covid's time?

Studies have shown that it worsened during the Covid period. Small and medium-sized enterprises (SMEs) are unable to repay their loans and therefore unable to obtain more loans and even without that reason, they wouldn’t be able to fulfill the requirements of the bank.

Apart from collateral, what other problems do businesses have?

In the case of banks, there is interest in lending, but there are few eligible entities. For example, there are many companies that cannot prove their profit in addition to providing collateral. To avoid taxes, there is the problem of increasing costs and reducing revenues. Most of them have zero tugrug in profits. Tax evasion seems to be beneficial to businesses, but it can ruin its future in the mid to long term. Banks are no longer able to provide various soft loans to companies that report losses.

What do we need to do to solve all these problems in a short period of time, and what would you emphasize if the research offered a specific solution?

Creating and implementing small-scale software for businesses in this area can have a significant impact on financial decision-making. In today's age of technology, it is not difficult to implement such software. If the software realistically records income and expenditure, banks will be able to lend to sustainable businesses without requiring collateral. It is also possible that the future income of business projects of reliable companies can be used as collateral and open up opportunities for project financing. In this case, companies do not have to pledge real estate. Again, there is a need for capacity building in enterprises. I believe that the United States Agency for International Development's (USAID) BEST Program for Sustainable SME Development and Transparency can have a positive impact on this. We just talked about where banks and businesses can't find common ground. There is a need to create bridges between the two by providing training, advice, services, and loan support to businesses that do not meet the bank's requirements. I personally see that this can be achieved through the BEST program.

This is exactly what small and medium enterprises are dissatisfied with. Which industry of SMEs should we support and provide loans to? is the question I understand that the Ministry of Finance and the Bank of Mongolia need to clarify. What other solutions are there to support businesses?

Yes, for the reasons I just mentioned, loans to small and medium-sized enterprises support large and medium-sized businesses. There are, of course, solutions. For example, under the government's 10 trillion MNT program, there is a 500 billion MNT grant to support youth employment, work and lifestyle. It would be better to spend this money on companies that are creating jobs, rather than spending it temporarily on things like fitness to change the healthy lifestyle of young people. In addition to funding, companies often face a shortage of human resources. On the one hand, there is a shortage of professional human resources to work in companies, and on the other hand, young people are unemployed after graduating from university. One way to connect them is to meet these needs through staff training and vocational training centers. Alternatively, companies may provide human resources and financial incentives to small and medium-sized enterprises by providing these grants to companies that have trained their own employees and have established stable employment contracts with their trained employees. This will give young people a stable job and income.

.

.

.

.

.

. 

.

.

.

.

.

.

.

. 

.

.

.

.

.

.

.

. 

.

.