Impact of Institutions on Lending : Informal Constraints and Enforcement of Bank Regulation in Mongolia

In the 1990s and unprecedented tranformation of the economic co-ordination of economies in transition was set in motion. As the reforms neither considered the time needed to establish the market nor dealt with the process itself, microeconomic reforms aimed at establishing the market and inducing market-oriented behavior need to be adjusted. The surprisingly slow process of economic transformation is a well-known but not well-understood phenomenon in economies in transition (EIT). Neither mac- economic arguing nor neoclassic micro approaches turned out to provide helpful tools in explaining the barriers to transform markets and institutions. Chuluunbaatar Enkhzaya addresses the issue of economic transformation, exemplarily by looking at the Mongolian loan market. Her methodological innovation is not only to employ the New Institutional Economy but also to operationalise the degree of institutional change. This is done by using concept mapping, besides the more standard way of interviewing. It allows to identify „action regulating knowledge'governing the decision behavior of credit officers and leading to an indirect observation of informal rules like attitude to risk, perception of supervision, social and ethic commitments. Enkhzaya adds to our understanding why the enforcement of banking regulation norms has not led to an efficient allocation of resources in EIT banking systems. Besides she gives an impressive description of the actual state of the Mongolian economy. In the 1990s an unprecedented transformation of the economic co-ordination of economies in transition was set in motion. As the reforms neither considered the time needed to establish the market nor dealt with the process itself, microeconomic reforms aimed at establishing the market and at inducing market-oriented behaviour need to be adjusted. Chuluunbaatar Enkhzaya examines the "inadequate" behaviour of banks in Mongolia by analysing the institutional framework of the banking system, especially in lending. She focuses on the genesis of informal institutions of lending and their interaction with formal institutions of lending. Herewith, informal institutions such as the attitude to risk were indirectly observed by diagnosing the "action-regulating" knowledge of bankers. In order to ensure an effective allocation of the scarce financial resources of Mongolia the author therefore suggests a change - as simultaneous as possible - of formal and informal rules Chuluunbaatar Enkhzaya ; With A Foreword By Alexander Karmann. Thesis (doctoral) - Technische Universität, Dresden, 2004. Includes Bibliographical References (p. 183-196)