The Two-Step Loan Project in Mongolia has successfully supported small and medium enterprises for over 20 years. Japan International Cooperation Agency (JICA) provided the funding through Official Development Assistance yen loans. The Ministry of Food, Agriculture, and Light Industry cooperated with international donor organizations during this period. Consequently, this Two-Step Loan Project has become one of the most effective financial mechanisms for domestic private enterprises. Mr. Jambaltseren Tumur-Uyaa, State Secretary, highlighted the project’s long-term impact in a recent interview. The initiative stands out for its significant contribution to SME development and environmental protection.
The Two-Step Loan Project operated in phases one and two from 2006 to 2015. Phase one used JPY 2.9 billion in seed funds, while phase two used JPY 5.0 billion. Since fully utilizing the yen loan seed funds in 2018, the ministry has maintained revolving fund operations continuously. Commercial banks conduct credit analysis and select bankable SME business applications for project financing. A steering committee under MOFALI leadership provides policy guidance and endorsement. Thus, the Two-Step Loan Project ensures financed projects align with government development policies and priorities.
As of the latest results, the Two-Step Loan Project has financed around 1,100 SME business expansion projects. These projects span both urban and rural areas with long-term financing amounting to MNT 400 billion, roughly USD 210 million. This investment has created thousands of new jobs nationwide. Sub-loans within the SME category cover agriculture, crop harvesting, intensive livestock farming, and food industries. They also support meat and dairy processing, bakery production, wool and cashmere processing, garment manufacturing, and metal fabrication. For environmental protection, sub-loans improve wastewater treatment facilities and renovate heat-only boiler systems in rural soum centers. Notably, 43 percent of total sub-loans went to SMEs across 21 provinces.
Looking ahead, the Governments of Mongolia and Japan have agreed to implement the next phase of the Two-Step Loan Project. JICA has already commenced a feasibility study since early 2026. The acute shortage of long-term project financing creates high demand for this next phase. Many more domestic manufacturing and service industries will gain opportunities to expand operations and increase profits. This will contribute to government efforts for sustainable development and environmental protection. In conclusion, the Two-Step Loan Project showcases a key achievement of Japan–Mongolia cooperation. It also stands as a symbol of enduring friendship and goodwill between the two countries.
