Mongolia

The legal framework analysis aims to provide general knowledge of the national cooperative legislation and of its main characteristics and contents, with particular regard to those aspects of regulation regarding the identity of cooperatives and its distinction from other types of business organisations, notably the for-profit shareholder corporation.

It aims to evaluate whether the national legislation in place supports or hampers the development of cooperatives, and is, therefore “cooperative friendly” or not, and the degree to which it may be considered so, also in comparison to the legislation in force in other countries of the ICA region, or at the supranational level.

In addition, the research aims to provide recommendations for eventual renewal of the legal frameworks in place in order to understand what changes in the current legislation would be necessary to improve its degree of “cooperative friendliness”, which is to say, to make the legislation more favourable to cooperatives, also in consideration of their specific identity. This webpage presents a snapshot of the legal framework analysis results for Mongolia.

This analysis exclusively deals with the National Cooperative Law of Mongolia. Cooperatives in Mongolia are divided into two categories: (1) credit and savings cooperatives, and (2) all other types of cooperatives (example- consumer, production, agriculture, etc.). In Mongolia, cooperatives are categorised as non-profit organisations. As per the Taxation Law of Mongolia, cooperatives are taxed the same as other private for- profit business entities and partnerships. 

Main laws relevant to cooperatives in Mongolia:

Cooperative Law of Mongolia, 1995 (last revised in 2011)

Credit and Savings Cooperative Law of Mongolia, 2011

Civil, Commercial, and Family Law of Mongolia, 1994

Cooperative friendliness

The cooperative legal environment of Mongolia is only limitedly ‘friendly’ to cooperative development. Some barriers which inhibit cooperative development are mentioned below: 

• Incompatibility of laws, such as cooperative and taxation law.
• Lack of consistent governing body has made cooperative law hard to understand.
• General cooperatives are currently regulated by the Ministry of Food, Agriculture and Light Industry. This is only suitable for agricultural cooperatives and hampers the development of other types of cooperatives.
• Credit and savings cooperatives are regulated in a way that they cannot compete with commercial banks. For example, credit unions cannot advertise their services.

Key recommendations for improvement 

Cooperative should be divided into two groups- non-profit social purpose cooperatives which are taxed as non-profits and for-profit economic purpose cooperatives which are taxed like businesses. They should be governed under a ministry with a wider scope, such as the Ministry of Labour. Credit and savings cooperatives should be permitted to function like banks, issue audits and insurance, and advertise their services.

Conclusion

Mongolia National Co-operator's Association (MNCA, ICA member) and Mongolian Co-operative Training and Information Center (MCTIC) are trying to strengthen their institutions to account for the unfavourable legal environment. They want to set clear cooperative standards to create a strong foundation for cooperative development; and be able to gather robust data and statistics for improving the current state of legal environment for cooperatives in Mongolia.

_{The legal frameworks analysis is a tool developed under the ICA-EU Partnership #coops4dev. It is an overview of the national legal frameworks at the time of writing. The views expressed within are not necessarily those of the ICA, nor does a reference to any specific content constitute an explicit endorsement or recommendation by the ICA.}