Program Details: Mongolia

Photo: Thatcher Cook for Mercy Corps

At more than 1.5 million square kilometers, Mongolia is the world's second-largest landlocked country. Considered part of east and central Asia, it is bordered by Russia and China.

Today, 38 percent of Mongolia's population lives in the capital city, Ulaanbaatar. The country contains very little arable land, with mountains to the north and west and the Gobi Desert to the south. Approximately 32 percent of Mongolia's 2.8 million people are nomadic or semi-nomadic.

Mercy Corps supports these rural Mongolian communities and herding families with economic, agricultural and civil society programs. Since 1999, Mercy Corps has established a strong reputation across the vast Gobi region, and continues to work with business associations and local organizations to ensure a robust economy that still preserves ancient Mongolian traditions.

A Country in Transition - Mongolia's Economic Constraints

During the early 1990s, Mongolia experienced a period of great transition as it moved from a Soviet style political system and state-based economy towards a market-oriented democracy. While these changes marked the beginning of stronger social, political and economic systems for Mongolia as a whole, the transition has not been smooth for large parts of the rural population.

A range of challenging conditions - including sparse and dispersed rural populations, harsh weather, vast distances, poor transportation, the limited quality and reach of crucial veterinarian services, and extremely limited access to important economic information and financial resources - have impacted the ability of rural Mongolian herders to create and sustain a strong and viable agricultural industry. As a result, poverty in Mongolia has stubbornly persisted, with some areas in the southern and western Gobi regions showing household poverty levels as high as 50 percent.

When Mercy Corps began work in Mongolia in 1999, rural herders produced several different types of agricultural products - including milk, meat and cashmere - but only at subsistence levels. Even for those herders who were able to produce items for markets, decisions regarding cost, quality and volume were based not on established and successful business practices, but instead influenced solely by centuries-old traditions. Herders also tended to overproduce their products - which were generally of low quality - and competed directly with one another for very limited sales.

With no access to crucial economic information - real-time pricing information, as well as market ebb and flow - rural herders were also at the mercy of outside traders, and often forced to sell their goods for far less then they were worth. And with no access to commercial credit and decent business training opportunities, even savvy rural herders could not make their agribusinesses turn a decent profit.

Mercy Corps' Economic Development in Mongolia

Mercy Corps economic development programs in Mongolia - the Gobi Initiative and Rural Agribusiness Support - deliver high-impact, market-oriented economic development programs with strong civil society components. We directly address the economic constraints facing dispersed rural herders and support rural communities in their quest to meet their economic and social needs, which will provide rural residents with a better quality of life.

Mercy Corps helps develop, diversify and strengthen rural businesses critical to Mongolia's agriculture sector, helping individuals, families and communities to become more self-sufficient and more connected to national and international markets. We enable rural entrepreneurs to access useful business information and necessary financial services, and support herder groups that are expanding or diversifying their business activities and developing herder cooperatives. We provide vital and essential continuing education for professional veterinarians and veterinary technicians.

Mercy Corps also empowers rural families and communities to participate in public sector decision-making from the local to the national level, enhancing the ability of these communities to make informed economic and social decisions at the local, regional and national level. We also work to improve livelihood opportunities for Mongolia's poor urban families as well as rural citizens.

To date, Mercy Corps has assisted more than 1,500 rural businesses with business plan development, and has provided more than 750 businesses with access to $2 million in commercial loans. Since the inception of the Gobi Initiative and Rural Agribusiness Support Program, Mercy Corps has provided 35,000 herders and rural entrepreneurs with technical, business and financial assistance. In addition, our Rural Business News magazine, market information system and publicly organized informational campaigns reach more than 500,000 people each year.

Rural Agricultural Businesses in the Gobi Region - Diversification and Expansion

In 2000 and 2001, many herder families lost huge amounts of livestock due to catastrophic weather. As a result, they moved to the larger cities in Mongolia, leaving behind their traditional lifestyle and increasing the problem of rural-urban migration.

Diversification of rural businesses can help mitigate the effects of weather and economic risks on herding communities by spreading income potential over a larger number of products. Mercy Corps encourages traditional herders to start businesses producing new products for the local economy. In the early 1990s, the production of vegetables in Mongolia was basically non-existent. In 2006, vegetable producers constituted 16 percent of Mercy Corps' Gobi Initiative clients.

Training and Technical Assistance in Support of Rural Agribusinesses

Mercy Corps offers herders and other rural Gobi entrepreneurs access to training and technical assistance by helping pay the fees of local consultants and continuing to offer start-up subsidies where needed. Once a direct relationship has been established between business owner and local service providers, Mercy Corps then reduces the subsidy, encouraging local service providers to rely more on the income they can generate from rural businesses and enabling providers to become more cost-efficient at the same time.

Access to excellent veterinary services is crucial for the success of any animal husbandry agribusiness in rural Mongolia. Mercy Corps works with the local Mongolian organization VETNet to provide all Mongolian veterinary clinics with continuing education through classroom training as well as field visits. This enables rural veterinarians to provide herders with more effective services, and enables participating clinics to access VETNet's high quality drug and equipment fund.

Mercy Corps has also established a market information system, through which herders can receive real-time market and price information on some of the major agricultural goods that they produce. We provide forage maps that help herders make better husbandry decisions, and publish the Rural Business News, a magazine that provides herder with regular - and accurate - agribusiness news and information.

Access to Commercial Financial Services - A Crucial Requirement

Mercy Corps helps herders and rural businesses identify new opportunities, assess risks, compare costs against income, and define their investment needs. Because access to commercial credit is still a challenge for many herders - as most commercial lenders require a higher level of collateral then the majority of herders can provide - Mercy Corps has enabled these herders to obtain commercial loans by providing them with additional cash collateral. Not only does this enable rural entrepreneurs to receive the commercial credit which they were previously denied, but many herders are able to continue taking out commercial loans - even without further support from Mercy Corps.

In 2001, along with the United Nations Development Program, Mercy Corps established its own commercial financial services provider - XacBank. Initially begun as a microcredit lender aimed at rural Gobi businesses, XacBank has grown to become one of the main commercial financial service providers throughout Mongolia and one of only two banks able to deliver services in Mongolia's rural areas. Although now independent, XacBank and Mercy Corps continue to work together linking an increasing number of herder clients to other rural banks.

Civil Society at Work in Rural Mongolia

Until recently, rural Mongolian residents did not have the skills and collective ability needed to work effectively with local governments to identify community development needs and issues. Only a few local civil society organizations were to be found in rural areas, and those that were there lacked the ability to mobilize communities and to provide services on an on-going basis.

With funding from USAID, Mercy Corps' Training, Advocacy and Networking project (TAN) works to strengthen civic action in five rural Mongolian provinces. "TAN" is a traditional recipe of mixed herbs used as a medicine in the Gobi region. Likewise, Mercy Corps' TAN Project is a mixture of initiatives that use local resources to help communities in Mongolia 's rural regions.

Mercy Corps' TAN project supports collaboration between civil society organizations and local government in order to:

• Increase community participation in local government decision making;
• Mobilize communities to identify, prioritize and address local development needs; and
• Support local civil society organizations to more effectively improve the impact of their services.

TAN's overall goal is to strengthen the presence of rural Mongolian civil society organizations by increasing their ability to work with communities and local institutions. This will contribute to a more robust social and political environment.