Prior to Mongolia’s transition to a market economy, its socialist economy was entirely based on paper-based transactions handled by the Bank of Mongolia (BOM) and all payments were manually settled in the country. With the approval of the Banking Law of Mongolia in 1991, commercial private banking has begun to emerge, and the significance of cross-border and inter-bank payments has increased due to the country’s integration into the global trade. In 1997, the BOM adopted European software technologies with a batch file format for interbank settlement, preceded by separate, decentralized initiatives of local commercial banks. Consequently, the paper-based interbank settlement method was abolished. In 2006, the BOM founded the National Electric Transaction Center, and interbank payments were classified into two forms of transactions: low-value and large value. In 2009, the real-time gross settlement (RTGS) system was adopted, and this development formed the backbone of wholesale banking infrastructure along with the central bank accounting and securities trade systems. Mongolia’s short development history of the modern financial infrastructure demonstrates that the regulator’s lead is crucial in financial development with the support of the private sector which was not well positioned to carry out such reform alone. This study attempts to assess the role of payment systems in promoting access to formal financial services and Mongolia's integration into the global economy.
Mr. Enerelt Enkhbold is Senior Investment Officer of East Asia Department Mongolia Resident Mission at Asian Development Bank (ADB). Prior to joining ADB in September 2012, Enerelt was a bank supervisor at the Central Bank of Mongolia in 2007-2012 and prepared the first stress testing report of Mongolia’s banking sector and drafted the first national Financial Stability Report. He has previously worked in Kazakhstan, Mongolia, Philippines and the United Kingdom, and is a research fellow at NUM-İzmir Kâtip Çelebi University Turkic Studies Center. Enerelt has processed and implemented development finance and technical assistance projects in areas of banking, private sector development, agriculture, food security, prudential regulation, ICT, including ADB’s first Payment System Modernization Project in Mongolia. His articles have been published in several journals-ADB Economics Working Paper Series, Central Asian Survey, Central Asiatic Journal and others. Enerelt is a co-author of a 2011 applied quantitative finance book. He completed an MSc from the University of Leeds (UK), and is currently a PhD Candidate in History at National University of Mongolia.
