Proparco gives Khan Bank US$50m long-term line with US$20m carved out for rural SMEs

Proparco has agreed a US$50m senior loan to Mongolia’s Khan Bank, allocating US$30m to climate-related investment and US$20m to SMEs in underserved rural provinces.

The transaction, signed during UNCCD COP17 in Ulaanbaatar, is the third operation between the French development financier and Khan Bank and is designed to provide longer-duration funding in a market where long-term finance remains scarce.

Sixty per cent of the facility will finance projects contributing to climate mitigation and adaptation. Proparco identified renewable energy, energy efficiency and sustainable buildings among the expected mitigation uses, while eligible adaptation projects may include sustainable livestock and agricultural investment.

The remaining 40%, equivalent to US$20m, is reserved for SMEs in ten rural provinces where poverty levels exceed the national average.

That allocation makes the facility more than a conventional green credit line. It combines climate finance with a geographically targeted source of longer-term corporate liquidity for businesses outside Ulaanbaatar.

Proparco did not disclose the loan’s maturity, interest margin or any individual sub-loan limits applying to Khan Bank customers.

The tenor nevertheless forms an important part of the transaction. Proparco said domestic long-term funding remains limited, meaning the facility should allow Khan Bank to offer maturities beyond those normally available from local funding sources.

That can matter for SMEs funding equipment, agricultural improvements or other productive investment whose cash generation occurs over several years rather than within a short working-capital cycle.

Khan Bank operates 535 branches, giving it a distribution network capable of directing the rural component beyond Mongolia’s main commercial centre.

The financing also provides a clear split of the development capital being deployed. US$30m is earmarked for climate investment and US$20m for rural SMEs rather than the full US$50m being presented interchangeably as both.

For Proparco, the deal uses an established local banking network to direct capital towards sectors and regions it considers underserved. For Khan Bank, it adds US-dollar long-term funding while broadening the pool of finance available for sustainable projects and rural businesses.