ADB approves $73m loan to improve social welfare support in Mongolia

“Mongolia took early and decisive action to prevent the outbreak of COVID-19 in 2020,” said ADB Principal Social Sector Specialist Karin Schelzig.

The Asian Development Bank (ADB) has approved a $73 million loan to improve social welfare support for the poor and vulnerable, especially women and children, to mitigate the socioeconomic impacts of the coronavirus disease (COVID-19) pandemic in Mongolia.

The project will specifically expand the child money program, which provides universal cash grants to all children aged 0–17. ADB will finance a share of the extended shock-responsive increase in the monthly child grant benefits through June 2021. This follows on from the earlier top-ups supported under an emergency assistance loan from April to September 2020.

“Mongolia took early and decisive action to prevent the outbreak of COVID-19 in 2020,” said ADB Principal Social Sector Specialist Karin Schelzig. “However, while the direct health impact was initially limited, economic data and several rapid assessments confirm that the socioeconomic consequences of the virus containment efforts were substantial, and things took a turn for the worse with the first community transmission recorded in November 2020, requiring renewed lockdowns.”

As early as May 2020, nearly three-quarters of all Mongolian households and 85% of poor households reported experiencing some sort of economic shock. Nearly two-thirds (64%) of all households reported an increase in food prices, while nearly three-quarters (73%) of self-employed workers experienced income loss. About 70% of farmers and herder households reported a decline in income compared with the previous year.

The project will also help strengthen social welfare programs and systems in Mongolia to be better able to respond to future shocks and crises. ADB will finance activities to update the poverty targeting system and the Integrated Household Database with more accurate data to be better able to reach people in need.

ADB will also support the digitization of social welfare programs into the "e-welfare" system to streamline benefit and service delivery and will implement and evaluate a pilot test of the graduation approach to introduce an innovative type of social protection program that builds on cash transfers with a holistic set of livelihood, financial inclusion, and coaching interventions.

The project forms part of ADB's holistic and comprehensive package of support to mitigate the impact of COVID-19 in Mongolia. The total project cost is $259.64 million, which includes government financing of $186.64. It is expected to be completed in 2023.