The Foreign Service Journal, January-February 2019

THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2019 47 The end game for Khan Bank was always privatization. Now that it was a successful bank, however, the government expressed interest in retaining it, at least through the next election, and some donors privately asked USAID to reconsider privatization. But the embassy resisted this change, and we continued to work with the Mongolian State Property Committee to find a new owner. In March 2003 Khan Bank was sold to a joint Japanese-Mongolian consortium. Soon after, the new owners signed a management contract with our team, including Pete Morrow. The new owners, not U.S. taxpayers, would pay the bills. The bank sold for $6.9 million, nearly twice its assessed value. I left Mongolia in spring 2004, one year after privatization. Five years later, I returned to Mongolia, this time as ambassador. Pete Morrow, who has since passed away, was still in Ulaan- baatar, continuing to serve as CEO. I asked him how much he thought Khan Bank was now worth. He estimated $100 million, nearly 15 times its selling price. During the intervening years, Khan Bank had paid tens of millions of dollars in taxes. The number of bank branches now exceeded 500 and the number of employees, virtually all Mongo- lian, surpassed 5,000. More importantly, Khan Bank had further expanded its loan portfolio in rural Mongolia, providing credit that helped fund tens of thousands of new solar panels, satellite dishes and motorcycles. To cite one example, the percentage of herder families placing solar panels on their gers (yurts) increased from 15 percent to more than 75 percent, illustrating one way in which the steppe was changing. USAID also worked with the economic section and front office to promote change in Mongolia’s financial sector in other ways, including privatizing the country’s Trade and Development Bank and establishing a newmicrofinance bank, XacBank, which was formed by consolidating two separate USAID and United Nations Development Programme informal microfinance programs. In yet another example of effective interagency cooperation, this effort was also supported by commodity proceeds from the U.S. Department of Agriculture. All these efforts focused on financial-sector reformwere largely successful, enhancing U.S. government credibility, moving Mon- golia toward a market-based economy and strengthening eco- nomic and commercial ties between the two countries. They also provided unusual opportunities for USAID to work with three of the four largest private banks in Mongolia, demonstrating the suc- cess of a practical, hands-on approach to financial-sector reform in ways that benefited both the United States and Mongolia. And this was just the beginning. The Khan Bank turnaround Khan Bank in downtown Ulaanbaatar. COURTESYOFJONATHANADDLETON