From Field to Factory: Mongolia’s Cashmere Production Goes Green 

Powering productivity 

As the sun rises over eastern Mongolia’s Khentii Province, the morning fragrant with the scent of wild thyme and other native grasses, Munkhzul Dulam stoops through the doorframe of his ger, a round, portable one-room home. He’s preparing for another 15-hour day following his herds of goats, sheep, and cattle across the steppe. His daily routine has remained unchanged since he married his wife 34 years ago.

His routine may be the only thing that’s unchanged. The solar panels propped up outside the ger power a freezer that keeps meat fresh in summer, run a small television balancing on a bench, and charge family members’ cellphones. The cellphones are especially important in spring, when Munkhzul fields calls from buyers to coordinate the sale of wool from his 300 cashmere goats.

Spring is the busiest and most lucrative time for the country’s 190,000 cashmere goat herder households, who comprise one-third of the country’s 3.5 million people.  Because of the high quality of cashmere fibers from local goat breeds, Mongolia is the second-largest producer of cashmere, with a global market share that is steadily expanding to 40 percent, according to the World Bank.  

But although Mongolia transitioned to a market-based economy in 1990, its domestic manufacturing and production capacity remains low, characterized by “significant untapped potential.”  Because of insufficient processing facilities, about 80 percent of Mongolian cashmere is exported, while only 20 percent is processed locally, according to the United Nations Development Programme. 

Companies like Tumen Suljee want to change that, says CEO Namkhaijamts Erdenebat, the son of founder Davaasuren Ayursed. Tumen Suljee requires 13 tons of cashmere annually, and the company works year-round to help herders produce this raw material. 

Much of this support enhances the herders’ quality of life while also boosting efficiency. Bolor Arur, another herder who supplies cashmere to Tumen Suljee, says that access to renewable energy sources has benefitted his business. 

Payments from Tumen Suljee that originated with Khan Bank’s green loan, along with another Khan Bank green consumer loan designed for herders, made it possible for his family to purchase portable solar panels. The panels power a freezer, which allows the family to eat meat throughout the summer without drying it, as well as an outdoor washing machine, which saves time that used to be spent washing clothes by hand. Charging their cell phones via these panels means that both herders can use mobile banking apps to receive and transfer payments—so they don't have to leave their animals to find a Khan Bank branch in the nearest village.  

As the company’s financial position has stabilized, it has been able to help the herders in other ways. For example, Tumen Suljee pays the herders immediately upon receipt of the cashmere instead of paying them in installments, as some other companies do, Namkhaijamts says. Both herders noted that this is critical to maintaining their animals. 

In addition, when there is a natural disaster, such as last year's dzud (an extreme cold event, linked to climate change, that prevents livestock from reaching grass), the company offers advance payments to help herders purchase animal feed so there is no interruption in productivity. The company also donates vaccines and medicines for cashmere goats and collaborates with herders to prevent overgrazing of the rangelands, to promote sustainability of the wild grasses and plants. 

From field to factory

Back at the Tumen Suljee factory in Ulaanbaatar, the whirring of weaving equipment and churning of washing machines means that a shipment of cashmere has arrived. Every square foot of the two-story building is packed with bags of raw and processed fiber, multiple pieces of machinery, stacks of finished clothing, and packaging materials.  

Both Namkhaijamts and his mother, who is now the company’s Director General, work from small offices next to the main factory floor. That’s where they spoke, in 2012, about the future of the company.  

“I was getting older, my husband had died, and I didn’t want my sons to be responsible for a business they didn’t care about if there was something else they wanted to pursue,” she says. “It was my life’s work, but it didn’t have to be theirs.” 

But Namkhaijamts and his brother, a business student in China, decided that cashmere production would be their life’s work, too. Though their mother had started the firm to sustain the family, its success meant that they could think on a much larger scale.

To start, Namkhaijamts, who had earned a computer science degree, sketched out a plan to automate the business; at that time, nearly everything operated manually, even the sewing machines. Together, the family resolved to modernize and export the “Made in Mongolia” label around the world.  

As Namkhaijamts began working with Khan Bank, which has granted the company about 10 loans since its founding, the new green loan program piqued his interest.

“I saw how energy-efficient equipment could transform the business, and I only choose energy-efficient machines now,” he says. “As the CEO, and as a Mongolian, I worry about climate change. We all have to do our best to reduce CO2 emissions.”  

The green loan allowed him to purchase a $70,000 “finisher” that compresses two weaving and sewing processes into one single process, producing seamless, ready-to-wear sweaters, leggings, gloves, hats, and other garments. It will cut energy consumption per unit of clothing by 21 percent, while saving materials and allowing the company to diversify its product line.  

The new machine will also increase the company’s productivity by 90 percent, which means that it can purchase more cashmere from Mongolia’s herders and hire additional workers at the factory.  

Providing Mongolian workers with jobs so they don’t have to migrate to other countries for employment inspires Namkhaijamts to keep expanding his family’s cashmere business. With the new, energy-efficient equipment, “We can help workers increase their skills while growing the country’s manufacturing capacity and helping the environment,” he says. “The next generation will develop and prosper.”