Mongolia’s Cooperatives Struggle with Taxation, Financial Support

Ulaanbaatar, Mongolia - The Mongolian cooperative sector is facing significant challenges, including a restrictive tax environment and limited financial support.

Challenges Facing Mongolian Cooperatives

• A taxation system that treats cooperatives as non-profit organizations, limiting their ability to allocate funds for reinvestment or distribution to members.
• Laws that do not fully recognize the business potential of cooperatives, creating an uneven playing field compared to for-profit businesses.
• Limited financial support mechanisms, making it challenging for cooperatives to access loans or attract investors.

The Impact on Cooperatives

• Cooperatives are often required to provide collateral, which they may not have, and banks are reluctant to lend to cooperative members.
• The absence of regulations governing investor-members of cooperatives further exacerbates the issue.

Recommendations for Change

The report recommends several changes to Mongolia’s legal framework, including:

• Dividing cooperatives into non-profit social purpose cooperatives and for-profit economic purpose cooperatives.
• Allowing credit and savings cooperatives to function like banks.
• Providing more clear regulations for secondary cooperatives.

Efforts to Strengthen Cooperatives

The Mongolian National Co-operator’s Association (MNCA) and the Mongolian Cooperative Training and Information Center (MCTIC) are working to:

• Establish clear cooperative standards.
• Gather realistic data on the sector.
• Improve the current state of laws governing cooperatives in Mongolia.

Conclusion

By addressing these challenges, Mongolia can unlock the full potential of its cooperative sector, promoting economic development and social welfare for its citizens.