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Ideologies of mortgage financing in Mongolia

ucsarpl16 March 2018

Rebekah Plueckhahn is a Research Associate on the Emerging Subjects Team at UCL – Anthropology. This post draws from research that forms part of her book Shaping Urban Futures in Ulaanbaatar forthcoming with UCL Press.

Visiting Mongolia in November-December 2017, many people I spoke to were preoccupied with the topic of the current influence of the recently implemented oversight by the International Monetary Fund (IMF) and their influence in numerous sectors of Mongolian economic governance as they prepared to make sizable loans to the country. The influence of the IMF is currently extending into a vast number of areas, including macroeconomics, national ministries, as well as Ulaanbaatar municipal budgets. One area that had implications across these areas was the IMF’s current recommendations for the systems of financialisation that have made Mongolia’s 8% mortgage (ipotek) program possible through Mongolia’s secondary mortgage market.

As part of their recommendations, the management of Mongolia’s secondary mortgage market is being transferred away from Mongol Bank (the Central Bank of Mongolia), to the government, in particular, the Ministry of Finance (IMF 2017, 15 and 67). This has come as part of redefinitions and restructurings of the role of Mongol Bank vis a vis the Mongolian government, that has been cemented through the recently passed amendments to the töv bankny tuhai huul’ or the Law on the Central Bank of Mongolia. Part of these restructurings has been attempts to increase the central bank’s independence from government, including limiting its influence in state budgets, and putting measures in place so that it can better act as an agent of government, more involved in price stability rather than inflation and exchange rates (IMF 2017, 44). Talking with people and reading about these types of restructurings brought into view different anticipatory conceptual ideals of what an economy or financial arrangements should look like or become. The IMF recommendations followed their Safeguards Assessment of 2017, an initiative that encourages standardisation of central banks internationally. This forms part of a much longer history of central banks worldwide becoming institutions that adhere to the ‘rules and rhythms of the market’ rather than political influence (Bear 2015, 190-193). Mongolian parliament member D. Damba-Ochir, quoted in news outlet montsame.mn, stated that the amendments to the law on the central bank will encourage togtvortoi baidal or stability in times of financial crisis (ediin zasgiin hyamral). Another person I spoke to said the move to transfer the ipotek program to the Ministry of Finance was done to encourage sustainability.

Expanding monetary circulations

Hearing these updates at the end of 2017 gave me an opportunity to reflect upon other perceptions on the roles and make-up of Mongolia’s secondary mortgage market and the ethics of mortgage provision. It also gave me a chance to reconsider the links between these factors and the ways this scheme has unfolded and manifested throughout areas of Mongolia’s systems of financialisation, built environments and personal spheres. During the course of my research from 2015-2017, different manifestations of economic ideologies have proliferated throughout the entangled assemblage of actors that comprise Mongolia’s banking and construction sectors. Through following different, interlinked forms of monetary circulation (möngönii ergelt) that allow people to access apartment mortgage financing, what I was alerted to were the different and sometimes (but not always) competing perceptions of how things should be and how the housing ‘market’ should be formed.

Out of the multiple influences of a slowly emerging housing finance program during the 2000s, initiated partly through assistance from the Asian Development Bank and USAID, as well as a hugely increased housing stock brought on by Mongolia’s speculative boom in foreign direct investment from 2009-2012, Mongolia’s mortgage ipotek system was launched in 2013 as an attempt to reconcile the huge demand for housing and the lack of affordable mortgage financing then available. This mortgage system, run by the Mongolian Mortgage Corporation (Mongolyn Ipotekiin Korporatsi) (MIK), provided an interlinked secondary mortgage market through funds issued by the Central Bank of Mongolia to participating commercial banks, allowing them to issue 8% interest ipotek (mortgages).

The 8% interest ipotek is the only kind of more affordable form of housing finance available on the market in Mongolia. It is also quite new. The alternative, for apartments bigger than 80sqm, is to take out a oron suutsnii bankny zeel (apartment bank loan), a loan drawn from savings within commercial banks themselves (savings-based loan), which is often offered at 17-20% interest and a shorter time frame in which to pay it back. For the 8% interest ipotek mortgage, the 30% deposit and the considerable employment history required in order to qualify for it means that this option often does not meet the intended market of low-middle income buyers, nor has it allowed a great deal of people from the peri-urban ger areas of Ulaanbaatar to access apartments. However, among people who can afford it, the demand has been, and remains, extremely high. However, due to a depreciation of the Mongolian tögrög and a lack of funds to inject in the system, the issuance of the 8% ipotek loan from the central system has been varying, including it being paused at the end of 2015, and resumed in varying ways at different points since.

Discussing 8% ipotek mortgage issuance with loan officers at different banks in November 2017, I was informed about the high demand for these mortgages and the fact that some customers are still waiting for money to appear even though their mortgages had been approved a year ago. Attempts to meet this high demand have given rise to different kinds of monetary circulation in order to make this possible. Expanding beyond the secondary mortgage market, within Mongolia the systems of financialisation and monetary links comprise of an ever-expanding set of circulations, arrangements, exchanges and connections. While the economy has stalled, the 8% interest mortgage has remained a kind of idealised form of housing finance regardless of the changing nature of the systems that support it or the fluctuating levels of funding different economic institutions receive.

One such way to meet this demand has been the cooperation between banks and construction companies in an attempt to maintain the 8% ipotek mortgage as an option. Speaking with a loan officer in a bank in Ulaanbaatar, they told me how customers can qualify for 8% interest house loan through their bank if they buy an apartment in buildings built by particular construction companies. This circulation of money between a bank, an individual and a construction company allows construction companies a better chance of attracting customers in order to recoup construction costs through attempting to meet the high demand that the system will no longer support. These ‘circulations’ sometimes consist of the conversion of other forms of capital into an expanded type of circulatory network. As seen in the following advertisement posted in January 2017, this construction company at that time received land (including compensating for self-built buildings or baishin) and cars in lieu of a 30% down payment (urd’chilgaa tölbör):

Figure 1: In January 2017, a construction company advertises a variety of different and flexible conditions on acquiring an 8% interest mortgage through their partner bank, including items that can be accepted in lieu of a deposit. They promise a ‘quick decision’ on apartment loan applications.

Considering the construction company’s role in promoting arrangements like this expands our understandings of how Mongolia’s secondary mortgage market can be conceptualised and redefined. During fieldwork in 2015 and 2016, construction companies were often engaging in forms of bartering of cars and building materials in order to complete projects and sell apartments. Collaborating with banks forms another aspect of doing business.

Expanding ideologies

Such a collaboration between a bank and construction company that provides a different way of financing of a singular (relatively) affordable option allows banks to continue to participate in a form of mortgage financing in the hope that the secondary mortgage market will become increasingly reliable. The idealisation of 8% interest ipotek mortgage extends not only for its ability for a wider group of non-elite people to buy apartments, but also an idealisation of the system itself and what it can bring to the Mongolian economy. Echoing in a different way the IMF stance outlined above, one loan officer told me the secondary mortgage market could ‘ediin zasagiin zöv goldrild oruulah,’ or ‘turn the economy onto the proper course.’ While people are also skeptical of the different arrangements making mortgage financing possible, in the minds of many people the system initiated by the Central Bank exists in its potentiality as much as its practice. Mongolia’s secondary mortgage system is quite new, and like other arrangements and entanglements that make up the mortgage market, it is still in the making. In the meantime, people rely on other connections (Narantuya and Empson, forthcoming), that support this system from within (Maurer 2012, 414). Its proposed transfer to the Ministry of Finance in September 2018 (IMF 2017, 47), will form another substantiation of this network’s financialisation that will undoubtedly give rise to new political and economic relationships, connections and circulations. These, like other forms of financialisation, will further shape this nascent but important network and continue to expand and give rise to different economic ideologies within Mongolia.

I’d like to sincerely thank Batbayaryn Erdenezayaa for her assistance with this research.

References:

Bear, Laura. 2015. Navigating Austerity: Currents of Debt Along a South Asian River. Stanford, California: Stanford University Press.

Bumochir Dulam. 2016. “The Politics of the Mortgage Market in Mongolia.” Emerging Subjects Blog, 29th January 2016. https://blogs.ucl.ac.uk/mongolian-economy/2016/01/29/the-politics-of-the-mortgage-market-in-mongolia/. Accessed 5th February 2018.

International Monetary Fund. 2017. “Mongolia – First and Second Reviews under the Extended Fund Facility – Press Release; Staff Report; and Statement by the Executive Director for Mongolia.” Washington DC. December 2017. https://www.imf.org/en/Publications/CR/Issues/2017/12/21/Mongolia-First-and-Second-Reviews-Under-the-Extended-Fund-Facility-Press-Release-Staff-45505

Maurer, Bill. 2012. “The Disunity of Finance: Alternative Practices to Western Finance.” In The Oxford Handbook of the Sociology of Finance, 413–30. Oxford: Oxford University Press.

Narantuya, C. and Empson, R. (Forthcoming) ‘Networks and the Negotiation of Risk: Making Business Deals and People among Mongolian Small and Medium Businesses’ Central Asian Survey.

The Price of an Election: Split hopes and political ambivalence in the ger districts of Ulaanbaatar

uczipm013 July 2017

This post was written by Liz Fox, a UCL ESRC-funded anthropology PhD candidate affiliated to the Emerging Subjects project.

 

[The material for this blog post was collected from a variety of sources that have been anonymised. For the privacy and safety of my many interlocutors, their stories have been aggregated. It does not refer to any specific place or people.]

“Come quick! They’re giving money after all!” Baatar rushed into the ger where his relatives were sitting, discussing the Mongolian parliamentary election that was taking place that day. The road to the election had been both long and disappointing and all present were in agreement that it had been the “dirtiest” election the country had seen in its 26 years of democracy. From the start there was mudslinging, or as it is known in Mongolian, “black PR” (har pr). Each of the three presidential candidates had been accused of one scandal or another, whether it was Ganbaatar’s (of the MAHN, or Mongolian People’s Revolutionary Party) 50,000 KRW bribe from the Moon religious group, Battulga’s (of the AN, or Democratic Party) 44 companies and messy family life, including a Russian wife and a son connected to drugs, or Enkhbold’s (of the MAN, or Mongolian People’s Party) selling of land when he was UB mayor, his feature in two secretly-filmed viral videos that tie him to bribery and the selling of government positions, and the accusations that he is actually Chinese. Indeed, when the candidates were announced, many Mongolians said there was no one to choose from, they are all as bad as each other and that it was an “unelectable election” (songuuldgui songuul).

I arrived in an Eastern ger district of Ulaanbaatar mere days before the first round election and learned that there had been an upswing in support for Ganbaatar, the Revolutionary Party’s Candidate. For an area that had preferred the MAN over the AN in the previous year’s parliamentary election, the outright rejection of the ruling party’s presidential candidate seemed surprising; and yet, Enkhbold was said to be the worst of the worst. Ganbaatar, the outsider candidate, had managed to differentiate himself in the eyes of ger district voters from the two big party candidates as being an honest and upstanding man. Similar to the popular support that Jawkhlan the singer had galvanised in the parliamentary election a year before, this year Ganbaatar was felt to have a “heart” for the people of Mongolia. Like Jawkhlan, Ganbaatar’s lack of high level education was even seen as a bonus: “What university did Chinggis Khaan graduate from, huh?” a middle-aged supporter asked.

Two nights before the election, a ger district-dwelling family and I sat in front of the TV in a small brick home, watching the final debate. The family were open with their criticisms, tutting and shaking their heads at almost everything Enkhbold and Battulga said. They spoke back to the figures on the television regularly with a “Shaaal hudlaa!” (What a liar!) or a sarcastic “Oo saihan yarij bn” (How nicely he speaks). In contrast, Ganbaatar’s earnest propositions were followed with resounding expressions of approval, “Yag zuw!”, “Unen shvv” or “Tiishdee”. It was clear that this election had become largely driven by emotion. For those on the margins who have seen 26 year of democracy lead only to increasing inequality and economic turmoil, the fat cats at the top eating the country’s natural bounty, sweet words and promises from wealthy politicians mean little. “They’re all the same,” people repeated, “they’ll say anything and then, when they’re elected, they’ll do nothing but eat”.

While there were rumours of cash hand outs in the run-up to the parliamentary election last year, politicians also used fairly “clean” techniques in their attempts to attract votes, such as building a new road or the distribution of the Tavan Tolgoi shares. This year, however, cash was flowing everywhere. Phone calls were made back and forth and what felt like hundreds of cars descended on the neighbourhood. Suddenly the call would go around, “the car is here!” there would be a rush to check for one’s ID card and four or five people at a time would leave the ger to meet the car. After the doors closed, each person would be handed a 20,000MNT note and told, “Vote for Enkhbold! After you’ve voted, bring your little white paper receipt back to us”. The passengers would then be dropped off a little distance from the local school that served as a polling station to avoid police detection. The party workers, temporary employees who stood to gain a 300,000 MNT salary for 20 days of work, would also receive payment according to the number of ‘white papers’ they collected from voters. In some areas, parties were offering 100,000MNT for 30 papers, in other areas it was 100,000 for 5. An instant economy of white papers then sprung up: people bartered over them, sold them to one another and told each other to deliver them to so-and-so. As matters unfolded on the ground, people were also glued to Facebook checking for news. A Democratic Party car carrying 120 million MNT to be distributed to voters in Western Mongolian provinces caused a stir. It was clear that both parties would do whatever it took to win.

Ger district families were quick to take advantage of the parties’ activities. Some relatives who live in the countryside but were visiting the city had wrongly heard that they could vote anywhere. Believing they could vote in Ulaanbaatar, they didn’t return to the countryside in time for the election. That, however, did not stop them from getting in the car and pledging to vote for Enkhbold in exchange for an easy 20,000MNT. A couple residents under the voting age of 18 were able to collect the money. Every person I know who took the MAN party’s money and voted, voted for Ganbaatar. Indeed, people took great satisfaction in having out-hustled the “hustlers” (luiwerchin) who had tried to buy their votes. Although the money was a bonus and everyone chased it, there remained some ambivalence and debate over whether it was truly clean. “They’ll say they bought us poor people’s votes cheaply,” one woman exclaimed passionately, the 20,000MNT note hidden in her clenched fist, “but they’re wrong! They didn’t buy anything. We didn’t even vote for their candidate. And anyway, why shouldn’t we take the money? They sit up there eating everything without a care for us out here. There’s nothing wrong with taking a little back from what’s been stolen from us!” While there was disappointment with the electoral proceedings, no one seemed completely cynical about the election itself. People voted for Ganbaatar with their hearts and truly hoped he would win, even as they worried that with the amount of money being splashed around by the big parties, their outsider candidate would have no chance.

Polls closed at 10pm and the election circus around the bus stop began to clear. People returned home to hear the 10 o’clock announcement of the early results. There was great shock and happiness when it became clear that Enkhbold had done poorly. The local area had indeed elected Ganbaatar, despite the payments, and the countryside relatives were relieved to see that their homeland had also supported Ganbaatar, without their votes. While the AN candidate Battulga lead the race, Ganbaatar’s strong showing looked like it would force a run-off election as no candidate would reach the minimum 50% of the vote. That prospect was incredibly exciting as people felt sure in a two-horse, second-round race Ganbaatar would win. The results continued to come it as the night progressed, the family remained glued to the television until around 2am. By that point, the picture seemed clear and the large extended family one by one fell asleep in their little brick home.

The shock upon awakening to hear that in the night Enkhbold had somehow overtaken Ganbaatar cannot be overstated. Apparently, one province’s election centre had lost power during the count and when the power was reconnected, the numbers favoured Enkhbold enough to push him ahead of Ganbaatar. In the ger district, it was universally considered a fraud and a lie. People felt for Ganbaatar, they argued he had run a clean race – unable to raise the funds to distribute the kinds of cash that the other two candidates threw around – and yet, or perhaps therefore, he had lost. Some days of confusion and dismay followed. There was debate over how exactly the second round would be organised, but eventually it became clear Ganbaatar had been cut from the race: the second round would have no clean candidate.

In the days between the first and second round elections, the only positive people could find in the situation was the possibility that the second round election might encourage even bigger cash hand-outs. Ger district residents had heard from countryside relatives that up to 50,000MNT per vote had been being distributed and were excited at the prospect another cash bonus. This hope, however, was only half the story. Politically-speaking, people remained committed to Ganbaatar, or at the very least committed against the two remaining candidates. A plan began to form to submit black ballots at the very least as a protest against Ganbaatar’s stolen election and perhaps even to force a third election with three new candidates.

Rumours continued to swirl about the dark methods by which Enkhbold would assure his own victory: apparently, his party workers would collect people’s registration numbers and then ‘hack’ the electronic voting machines to ensure that those votes would go to him. Indeed, two days before the election a relative arrived at the home asking the family to write down their registration numbers and promising to give them 20,000. As it happened only two siblings were home at the time, one 19, the other 23. What followed was a tense but jovial negotiation. Their uncle tried to use his relative authority to ‘encourage’ them to write down all the eligible family members’ ID numbers, while the other two slid between positions, sometimes deferring to their absent mother’s authority (their mother being the uncle’s elder sister) telling him to ask her, and other times insisting that they be given the money up front or that they would only sell for a higher price. Eventually the uncle left to try to collect the neighbours’ ID numbers, telling the two he would be back in the evening.

The morning of the election came and went without event. The previous day the ruling party had released a sudden notice that the ‘children’s money’ (20,000MNT/month per child) that had been stopped for all but the poorest families since February would suddenly be restored: the full amount being automatically deposited into people’s accounts. Queues at the bank reached into the hundreds. For the ger district family, this development was a disappointment. As a poor family they had been collecting the children’s money every month as a vital part of their monthly income. As such, the windfall that came to richer families did not come to them at all: further proof in fact that the ruling party didn’t care about the poorest citizens. It wasn’t until the evening until Baatar burst into the ger announcing that there would be pay-outs after all. This time no car came and the eligible voters walked to the polling station. A phone call told them to wait behind a small shop that sells second-hand clothes. Then a further call told them to go behind the school. A third call then told them to vote first and collect the money afterwards. The family duly deposited their blank ballots and then began to congregate with neighbours and relatives outside the polling station. Rumours spread this way and that, and yet no money appeared. A middle-aged man told me, “It’s sad isn’t it to see how we Mongolians will run after only 20,000MNT. But what can we do? We need the money and if they’re going to give it out why shouldn’t we have some?” Tired of waiting at the bus stop, people headed home. Eventually that night the money came: another 20,000MNT each.

Despite his efforts, both black and white, Enkhbold did not win the election. Battulga defeated him and will be inaugurated today (the 10th). Ger district residents seemed to have lost interest in politics the day after the election. Some people even said, “Maybe it would have been better if Enkhbold had won: what can a AN president do in the face of a majority MAN parliament?” People were proud of their blank ballots: around 100,000 were cast across the country, but not enough to force another election. For the most part, however, things returned to normal: politicians don’t care about the ger district and their chronic absence speaks louder than the occasional sweet words ger district resident’s hear around elections. Ger district residents resumed their lives, briefly 40,000MNT richer but without any hope that positive change would be on the horizon.