EBRD: Agro Leasing Opportunities December 2014Ulaanbaatar Matthieu Le Blan, Head of Office

Contents 1.What is agro leasing? 2.Market size 3.EBRD experience in agro leasing 4.The role of banks 5.SME leasing policy initiative 6.Building demand for leases 7.Business environment 8.Summary 2

Financing for farmers to purchase agricultural equipment, allowing the agricultural sector to pay equipment suppliers over time Financing provided by financial institutions in partnership with equipment distributors Payback periods should coincide with farmer cash flow cycles 3 Agro Leasing What is agro leasing?

4 Agro Leasing Market size Total Mongolian Leasing Market YearClientsPortfolio $42,000, ,000$100,000,000 Only 5% of leases are currently used for agricultural equipment

Agro Leasing EBRD experience in AgroLeasing 5 John Deere is the world’s leading manufacturer of agricultural, construction and forestry equipment EBRD provided a five-year loan of up to RUB 4.7 billion ($130m), complemented by a risk-sharing agreement for up to RUB 1.6 billion ($45m), through which EBRD shares part of the risk from John Deere’s portfolio of local leases Both facilities have supported John Deere in developing its leasing operations in Russia, which allow local companies, including SMEs and farmers, to finance the acquisition of John Deere equipment This new financing program has proved very successful, with John Deere having extended several hundred leases during the last two years to a wide range of customers in a market with a strong deficit of modern and efficient agricultural machinery and where financing is not always readily available to SMEs and individual farmers

6 Agro Leasing SME leasing policy initiative Funded by the European Union, implemented by the EBRD Objective to build leasing market Starts in January 2015 Build demand for leases Build capacity of leasing companies Improve business environment

12-month public information campaign using television, radio, and social media Objective is to inform SMEs about the benefits of leases to obtain capital equipment Financial education events to address lack of technical knowledge amongst SMEs 7 Agro Leasing Building demand for leases

Launch agricultural leasing product 9-month technical assistance assignment Design agricultural underwriting policy Market entry strategy Coaching for staff in launching new product 8 Agro Leasing XacLeasing

Revise tax code to include best practices for leasing Example: deducting lease payments from taxable income Fine tune financial leasing law to improve risk management Example: disallowing subleases Adoption of operational leasing framework for use of large-scale capital equipment Options: separate law versus integrated law Include leases under the government’s SME development fund 9 Agro Leasing Business environment

10 Agro Leasing Summary Around the world, farmers rely on lease financing to fund equipment upgrades that drive growth Agricultural leases will help modernise farming in Mongolia Working alongside banks and the government, the EBRD will continue to contribute to Mongolia’s economic development

Thank you Matthieu Le Blan, Head of Office