Banking and Insurance
Before 1924 Mongolia lacked its own banks and currency.
Mongolians bartered, using such commodities as livestock, tea,
and salt for exchange, or such foreign currencies as the United
States dollar, the Russian ruble, the British pound, and the
Chinese Mexican dollar (or, Yanchan, then a standard currency in
coastal China) in commerce. Chinese and Russian banks offered
credit, as did monasteries and private moneylenders. The
government began to transform this chaotic monetary situation
with a series of reforms, starting with the establishment of
Mongolbank, or the Mongolian Trade-Industrial Bank, in June 1924.
Mongolbank was founded as a Mongolian-Soviet joint-stock company.
In February 1925, the tugrik was made the official national
currency, and it was slowly introduced into circulation over the
next three years. In April 1928, all other currencies were
withdrawn from circulation. In 1929 the government drove private
moneylenders out of business by establishing a monopoly on
foreign trade and then outlawing private lending.
The establishment of a stable financial and monetary system,
with a centralized bank controlling the national currency flow,
permitted the government to introduce a First Plan in 1931. In
1933 additional banking reforms strengthened the position of
Mongolbank in the economy. All state and cooperative enterprises
were required to keep their accounts with the bank, and cash
transactions were limited effectively to the household sector of
the economy. Thus Mongolbank, which was firmly under government
control, was able to monitor and to supervise the business
transactions of all enterprises. In April 1954, the Soviet Union
handed over its shares in Mongolbank, which was renamed the State
Bank of the Mongolian People's Republic. In 1960 the bank's
lending activities were restricted to state, cooperative, and
private enterprises for which investment funds were approved by
the national budget.
In the late 1980s, the State Bank granted short-term credits
to cooperatives and state enterprises and long-term credits to
the economy's industrial sector. Government borrowing from the
bank was limited, although the limits were not always followed.
The State Bank worked closely with the Ministry of Finance, and
it was governed by a central board. In 1984 the State Bank had
more than 400 offices and branches throughout the country. The
State Bank, as the central bank, conducted currency transactions
with foreign countries and had agent relations with about seventy
foreign banks. Insurance was offered by the State Directorate for
Insurance, or Mongoldaatgal, which was under the control of the
Ministry of Finance.
Data as of June 1989