Mongolia’s Cashmere Industry: EBRD Initiatives for Sustainability and Growth

Mongolia’s Cashmere Industry: EBRD Initiatives for Sustainability and Growth

(IN BRIEF) Mongolia is a significant player in the global cashmere industry, producing nearly 40% of the world’s raw cashmere. However, challenges such as limited processing capacity and environmental issues threaten the industry’s sustainability. To address these challenges, the European Bank for Reconstruction and Development (EBRD) is collaborating with Mongolia’s government and local institutions to support the entire cashmere production cycle. This includes providing financial solutions and consultancy projects to enhance farming practices and pasture management. The aim is to unlock the industry’s potential, contributing up to US$1.5 billion annually to Mongolia’s economy. Additionally, the EBRD is assessing the environmental impact of the industry and working on sustainability initiatives to preserve Mongolia’s traditional way of life.

(PRESS RELEASE) LONDON, 26-Oct-2023 — /EuropaWire/ — The European Bank for Reconstruction and Development (EBRD), a multilateral developmental investment bank, recognizes the paramount importance of the cashmere industry to Mongolia, where it accounts for nearly 40 percent of the world’s raw cashmere production. In a country with approximately 3.4 million people, nearly 190,000 herder households oversee nearly 27 million goats. The processing sector employs around 10,000 people, with almost 90 percent of factory workers being women.

Cashmere, a prized fiber obtained from a unique breed of goat native to the Gobi Desert, is traditionally collected by hand during March-April. Mongolia boasts the broadest natural color range for cashmere, featuring white, beige, warm grey, and brown varieties.

The journey of Mongolian cashmere begins with the collection of raw cashmere, which is then transported to processing facilities. Here, it undergoes meticulous color sorting, manual removal of guard hair, and contaminants. The cashmere is then washed to eliminate remaining dirt and dust before the crucial drying process. Once dried, it passes through dehairing machines and undergoes dyeing. In the yarning (spinning) phase, dehaired cashmere batches are fed into spinning machines, which skillfully twist the fibers into yarns or threads, giving birth to the globally renowned fine fabric.

The final stage involves manufacturers knitting or weaving the yarn into finished products. This intricate, time-intensive process, which can span up to six months, relies heavily on manual labor to ensure the uncompromised quality of Mongolian cashmere.

Recognizing the challenges faced by both processors and herders in the cashmere industry, the EBRD has been diligently working to enhance the entire value chain’s sustainability. Among the notable challenges is Mongolia’s limited spinning capacity, allowing the processing of only approximately 4,500 tonnes of the annual 9,300 tonnes of raw cashmere produced.

Addressing these challenges, the EBRD collaborates closely with the Mongolian government and local financial institutions to provide targeted support across the entire production cycle, from combing to finishing. This support encompasses tailor-made financial products, such as working-capital financing, as well as consultancy projects aimed at improving farming practices and pasture management. The ultimate objective is to unlock the full potential of Mongolia’s domestic cashmere sector, which has the capacity to contribute up to US$1.5 billion annually to the Mongolian economy.

The EBRD’s involvement is pivotal not only due to its extensive experience in implementing green economy financing projects but also its ability to address complex environmental concerns. Mongolia’s growing goat population driven by international fashion industry demand has led to overgrazing, pastureland degradation, and desertification—a significant environmental risk for Mongolia, which is already grappling with the effects of climate change.

To comprehensively assess the environmental impact, the EBRD, in collaboration with Mongolia’s leading cashmere manufacturer, Gobi, and the Sustainable Fibre Alliance, has embarked on the three-year Supporting Sustainable Cashmere Production project. The project has culminated in detailed policy recommendations and practical guidelines for herders to enhance pasture management, alongside models for traceability.

While the journey is ongoing and will require substantial expertise and financial investment, the goal is undeniably noble: the preservation of the cashmere industry and its transformation into a sustainable pillar is more than an economic necessity; it is imperative for safeguarding the cherished Mongolian way of life.

Media contact:

Anton Usov

Tel: +44 207 338 7805
Email: press@ebrd.com

SOURCE: EBRD