Khan Bank kept its rural branches and turned near-liquidation into Mongolia's largest bank

Mongolia's Agricultural Cooperative Bank was created in 1991 out of the state bank's rural network: several hundred branches and more than 2,600 employees. Through the 1990s, politically directed loans to failing state enterprises, weak controls and a poor legal framework drove the bank toward insolvency and liquidation.

In 2000, USAID, the World Bank and the Mongolian government agreed on a privatization plan whose condition was an outside management team. DAI installed CEO Peter Morrow, who decided to leverage rather than cut the 269 rural branches — branches that 400,000 people were using mainly to pay taxes or collect salaries.

Morrow's team launched a lending program, converted payment services into deposits, built marketing, installed controls and training, and restructured management. Within half a year the bank was profitable again; the new brand and strategy drew three viable bids in the 2003 privatization.

Today Khan Bank is Mongolia's largest commercial bank, with more than 545 branches serving an estimated 78% of Mongolian households, including herders and farmers. IFC has been a partner since 2004, lending US$30 million in 2013 and a further US$40 million subordinated loan to fund SME lending.

The branch network was the asset, not the cost

An outside management team removed political interference at the root.

The rural network was repurposed from cost center into distribution.

Turning payments into deposits built a stable funding base quickly.

Profitability before privatization produced real bids and a real owner.

When a state bank is dying, don't shrink it — put its stranded network to work: keep the branches, convert payments into deposits, and fixed costs become distribution.

Khan Bank became the anchor of Mongolian rural finance: more than 545 branches reaching about 78% of households. IFC, a client since 2004, extended a US$30 million senior loan (signed March 2013) and a US$40 million subordinated loan (approved September 2013) to strengthen SME lending. In 2024 the bank issued Mongolia's first green bond — US$60 million, with US$15 million from IFC and US$35 million from FMO — to fund renewable energy and energy-efficiency lending, and it continues to serve the herder and farmer customers the turnaround was built around.