February 4th, 2011
Notes of an Adventure Capitalist: Mongolia
After spending a day acclimating to the Ulaan Baatar streets as modern nomads, it was our time to investigate the inner-workings of a new economy. Mongolia, which had a GDP per capita of $1,573 in 2009, was now boasting a booming minerals extract sector. This drove corporate profits and foreign direct investment up, making the Mongolian economy a veritable proto-kazakhstan, and explained the presence of Irish pubs, Lexus SUVs, and commercial bank branches which dotted the capital city.
Today was to be a lucky and fortuitous day, as we had the opportunity to wear the most presentable clothing we owned, which at this point was for both of us a pair of well worn jeans and shirts which were to hopefully ment to be worn wrinkled. We polished our shoes in the divice provided at the door of the glorious and fortuitous Wen Zhou Hotel that morning and strolled into the blazing Mongolian sun before Ariunna arrived in her charriot.
Today we were to have the opportunity to speak to Jargalsaihan Dambadarjaa, chairman of Xacleasing and a seasoned financial professional known regionally for his adept employment of Social Media. As a prolific blogger concerned with the well being of his countrymen, Mr. Dambadarjaa engages sociopolitical issues through both his publishings and the daily work he does at the head of Xacleasing, a member company of Tenger Financial Group. With Ariunna, Dr. D’s daughter, at our side, we considered some final questions for the seasoned financial professional in this no doubt arduous and volatile financial climate.
XacLeasing, the firm which Dr. D chairs engages in what it discribes as a kind of Microfinance. While generally considered a socially organized financial arrangement in which money is pooled to provide loans on the magnitude of 3 to 4 figures, microfinance in Xacleasing’s case deescribes loans generally considered small by international commercial banks. In the case of Xasleasing, these loans to individuals, small ventures, and medium sized enterprises are collateralized by assets such as construction, transport, or mining equipment, and in the occasional case, real estate.
With Dr. Dambadarjaa, we discussed the nature of recent growth in the Mongolian economy driven by resources, the fledgling financial market, and the gigantic untapped potential on regional borrowers and lenders, most of whom were modest in size.
He encouraged us to continue our investigation of the economy through his firm, and to that end introduced us to the Philipp Marxen, a recent recruit from Germany who now headed up Tenger’s China investment office.
Philipp went into detail describing Tenger’s efforts in developing microsavings accounts with no minimum balance marketed toward first time bank customers in the country. I could relate to the fellow as a lad with a taste for adventure and a penchant for frontier markets. With experience leading investment project’s in Paraguay’s agricultural market and a licensed derivatives trader on the European Energy Exchange, Philipp came to Mongolia seeking career development alongside the change to do something truly different.
After an informed explanation of the regulatory environment of Chinese consumer finance, Philipp invited us out for lunch at a local Indian restaurant which apparently garnered some fame. Sipping down Lassis, Philipp delved into his background further. By the time we had finished, the Mongolian microfinance landscaped looked significantly more fascinating than it had when it was completely opaque that morning.
Strolling off the rice and curry, we walked to the splendorous main square in front of Mongolia’s parlament, the great Khan holding court atop a mighty steed.
Across the street, we saw a forlorn pink building in a fantastic location. Upon further inspection, it revealed itself as the Mongolian Capital Market, commonly known as the Mongolian Stock Exchange. Rapping on the door and speaking to the attendant, we were able to garner a guided tour through the establishment. Each broker member of the exhage has a seat at the exchange to trade on behalf of its clients, and the exchange is open for one hour each day. For most of Asia’s exchanges, the Mongolian Stock Exchanges trading hours represent a lunch break.
Fascinated by the exchange’s earnest and deserted interior, we perused the walls, looking at charts of bond issuance and stock offerings over the past couple of years. We took a lucky moment to host a brief press conference in front of the marble backdrop of the press box.
Considering the challenges and thrills of operating in such an environment, our minds entertained ideas of new ventures in Mongolia. Was this country to become the next Dubai or the next Kazakhstan as a result of its newfound resource wealth? How much of the extracted value would recycle its way back into the economy of the nation? Was the role of a small and illiquid equity market on its way to playing the role of its larger Indonesian counterpart? We pondered thee thoughts over a small feast of mayonaise carrots.
And with that, we prepped our bodies for a next day of rigorous wheeling with a night of rest.