Consumer lending and bad loan risks mount in Mongolia's banks

CreditSights is encouraged by increasing regulatory efforts to address interconnectedness of companies.

Consumer lending and interconnectedness are amongst risks faced by Mongolia’s banking sector, said CreditSights by Fitch Ratings.

“We view interconnectedness as an important risk in Mongolia's financial system, existing not only between banks and [non-bank financial institutions (NBFIs)], but also between banks and large corporates and/or their controlling families,” the company said in a report on Mongolia's banking sector published 17 August 2026.

CreditSights said that they are “encouraged” by what it sees are increasing regulatory efforts to address risks related to this.

The main emerging area of credit risk is consumer lending, the report said, based on CreditSights’ visit with issuers, regulators, and financial intermediaries in Ulaanbaatar in early August.

“We believe this risk is closely linked to the rapid growth of NBFIs, with regulatory fragmentation as the underlying driver,” CreditSights said.

CreditSights also expressed little confidence in Mongolia’s efforts to establish an asset management company (AMC) tied to the country’s bad loans.

“[Whilst] the government is promoting the establishment of an AMC, progress does not appear particularly encouraging, and we see uncertainties over its ownership structure, investor participation, and commercial viability,” CreditSights said.

Mongolia’s non-performing loan (NPL) ratio for corporate loans—higher relative to other loan categories—is partly blamed on inefficiencies in resolving bad debts through its court system, it said.