Public Dialogue Videos
Founding Agreement signed to create
private sector-led Credit Information Bureau
Fifteen commercial banks and two non-bank financial institutions signed an agreement on 9 June to establish a commercial credit information bureau. The signing ceremony that took place at the offices of The Mongolian Bankers Association (MBA) was the culmination of the joint efforts of the seventeen founding shareholders, the MBA and EPRC.
These efforts began on 2 November, 2005 when the BoM and the project organized an open discussion on the “Future of the Credit Information Bureau.” Eighty participants, including the MBA, thirteen commercial banks, thirty–two non–bank financial institutions and four public utilities companies attended the event. At the meeting the BoM publicly declared its willingness to transfer the Credit Information Bureau (CIB) to the private sector.
On 29 June, 2006, EPRC and BoM convened another open meeting of interested parties where Mr. Roger Nye, an international expert that the project fielded, gave a detailed presentation of his findings. His recommendations were that BoM take some critical steps toward preparing the CIB for privatization. These steps included:
- Preparing the groundwork by installing improved communication links and software to address user complaints
- Introducing nominal inquiry fees for users
- Exploring legal options for a private CIB
- Convening a working group of stakeholders to discuss and decide on the critical issues facing such a new venture, such as:
- Identifying shareholders and the composition of membership
- Drawing up a business plan
- Determining when to privatize the CIB
- Assuring the security, timeliness, privacy and accessibility of data
- Engaging foreign technical assistance to assist with initial operations.
On 28 February, 2007, the MBA, with project assistance, organized a meeting of senior bank executives to examine options to improve the services of the existing CIB. Upon a project summary of current status, possible courses of action, and discussion, the participants agreed to form a Working Group to develop a Memorandum of Understanding (MOU) on the organization of a private sector-controlled company to provide credit information services. On 10 April, 2007, under MBA and EPRC auspices, thirteen commercial banks and three non-bank financial institutions signed an MOU to establish a private sector-controlled company to provide credit information services. The MOU provided that a new Working Group would be formed to:
- Prepare a business plan
- Recommend a strategic solution to the issue of privatization of the existing CIB that the BoM currently operates versus starting up a new private credit bureau
- Oversee the implementation of a revised legal framework to facilitate the operation of a private credit information bureau
o Recommend who will be allowed to use and/or become shareholders of the CIB
- Recommend a corporate structure
- Liaise and negotiate with potential strategic partners on technical assistance and financial participation.
The project sought the involvement of the IFC to provide specialized technical assistance on the structuring of the CIB and a team from the International Finance Corporation (IFC) Global Credit Bureau came to Mongolia in April 2007. Following several high-level meetings with the Working Group, major banks, the BoM and a presentation to the stakeholders, the IFC team, the Working Group, and EPRC reached an agreement in principle to collaborate on the development of a private credit bureau.
Subject to the negotiation of an advisory agreement, IFC would provide technical assistance to the Working Group, on a cost sharing basis, on operational matters related to the credit bureau including assistance to select a vendor of appropriate technology and an operating partner. EPRC, on the other hand, would continue work on enabling legislation and regulations to facilitate establishment of the private sector-led CIB.
On 14 May, 2007, a team of MBA lawyers and Mr. Roger Nye, an international expert on credit information bureaus supplied through EPRC, presented their recommendations on the legal framework for the proposed new private CIB. Their presentation included a draft CIB law supporting the principles of a modern credit information bureau and draft amendments to several related existing laws.
In October 2007 and in preparation for signing the MBA-IFC technical assistance agreement, an IFC credit bureau expert worked with the MBA Working Group on CIB establishment to define the tasks to be conducted in the feasibility analysis and business plan preparation.
In December 2007, the IFC delivered their feasibility analysis, preliminary business plan and recommendations for structure of a privately owned and operated credit information bureau to the MBA CIB working group. After circulation of the report to its members and several meetings of the MBA CIB working group and of the MBA, on 7 May, 2008 the MBA discussed and voted on the recommendations.
The Founding Agreement.
At the request of the MBA CIB working group, EPRC drafted the founding documents which were signed on 9 June, 2008. The principal provisions of the Founding Agreement are:
- The company will be called “Credit Information Center LLC”
- The company will conduct business activities in accordance with the “Credit Information Bureau Law”
- At least 51% of the shares of the company will be owned by Mongolian legal entities
- Up to 41% of the shares may be owned by foreign individuals or legal entities
- All amounts contributed to the development of the CIB to date by the Founders will be converted to shares of the company.
Once the company is duly registered under Mongolian law, it will engage the IFC to assist with a tender to source an internationally recognized CIB operator to establish and operate a Mongolian CIB to be owned up to 49% by the operator and 51% by Mongolian private sector stakeholders. The project will continue to advise the Founders working group.
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August 2008
