In Mongolia, one of the main barriers impeding the implementation of energy efficiency and renewable energy projects is funding. More than 90 percent of all businesses are small- and medium-sized enterprises (SMEs) and though everyone agrees that most of these are using outdated, inefficient equipment, few have the financial resources to upgrade to more sustainable technologies.
Enter XacBank. This forward-thinking Mongolian bank is the first private sector entity to be accredited by the Green Climate Fund (GCF). Over the last decade, XacBank has been partnering with various financial institutions to provide environmentally sustainable solutions for businesses and consumers. Their specialty is loan products that finance emissions reduction projects. To expand their existing programs, XacBank submitted a proposal to the GCF to create a loan facility specifically aimed at SMEs that would offer better terms and lower interest rates, with the goal of putting efficient, sustainable energy solutions in the reach of Mongolian businesses.
But in order to put together their proposal, XacBank needed to assess the situation on the ground, and to look closely at what kinds of technologies and solutions are appropriate for Mongolian businesses, under Mongolian circumstances. Here is where UNEP-DTU’s Technology Needs Assessment (TNA) project was able to lend a helping hand. Over the last decade, TNA has helped dozens of countries identify appropriate technologies for their specific adaptation and mitigation needs. The program’s assessments take into account vast amounts of data, offering countries the opportunity to make the right decision for their particular circumstances and resources, be it new equipment, techniques, services, or capacities necessary for mitigating GHG emissions and reducing vulnerability to the effects of climate change.
In order to develop its funding proposal, XacBank conducted an extensive review of studies examining Mongolia’s energy efficiency (EE) and renewable energy (RE) market, including the TNA for Mongolia. Among other things, the TNA supplied a clear analysis of the barriers to the spread of EE and RE technologies in the country. The assessment highlighted the high cost of capital as one of the main forces restraining the market’s growth. XacBank’s program seeks to directly address this barrier by lowering interest rates with co-financing from the GCF. The TNA also helped XacBank identify the types of technologies that offer the greatest potential for reducing carbon emissions in the Mongolian context. Using the TNA and other resources, XacBank was able to develop a strong proposal, and their submission was approved by GCF.
The Green Climate Fund contributed USD 19.5 million to XacBank to extend its existing USD 40 million business loan programme helping local companies cut their greenhouse gas emissions.
While the TNA process takes a top-down approach, offering a general roadmap indicating which direction is most appropriate to take, on the ground implementation requires a bottom-up strategy, identifying problems that effect a local population and searching for solutions. In the case of XacBank, the top-down and bottom-up approaches met happily in the middle, complementing each other. The TNA identified high-priority solutions, offering an invaluable overview of the situation and helping XacBank develop a program that eases the way for SMEs to make use of these solutions on the ground.