Technical assistance to Xacbank to establish an end-user loan facility

According to a 2016 UNICEF report on the impact of air pollution on children in Mongolia, Air pollution in Ulaanbaatar is caused by a combination of high emissions and the city’s unique geography and climate. The city, which lies in a valley surrounded by mountains, has grown rapidly, with an influx of people from rural areas looking for better opportunities for themselves and their families. They settle on the outskirts, often bringing their gers (traditional circular felted tents) covering the hills surrounding Ulaanbaatar.

Mongolian winters are bitterly cold, with winter temperatures in the capital falling to minus 40 degrees Celsius (-40°C). Increased urban migration and high demand for heating is putting increased stress on the ger areas’ electricity grid. As a consequence electric heaters are not an option for most households, and coal or wood are used for heating instead. 

The government has put in place incentives to increase the uptake of electric heaters and solar technologies by reducing tariffs and import duties, but the cost of electric heaters and other alternative technologies is a barrier for many ger area households.

The pilot finance programme aims to make clean energy products accessible and attractive for poor households in order to accelerate efforts to reduce local air pollution and mitigate Mongolia’s contribution to climate change.

Building on the experience of the Eco Products Distribution Programme, XacBank is looking to identify and introduce new types of energy-efficient heating solutions, such as electrical and solar heating systems that are affordable for low income households and capable of generating monthly net savings. 

The Coalition is providing technical assistance to XacBank to inform its selection of heating technologies eligible for lending and definition of terms and conditions of the loans.

By combining efforts with the Frankfurt School of Finance & Management, the Coalition is helping XacBank develop a financial product that will provide attractive end-user financing for households in ger areas.

This involves a systematic investigation of the potential technology options and supply-demand scenario, as well as analysis of the various financing options.