The Currency Exchange Fund (TCX), Loan 2020

Long-term finance in developing countries is often provided by development banks and other international investors who naturally invest in hard currency. The local borrower, earning local currency, has limited scope to absorb a currency mismatch between income and liabilities, and thus should borrow in local currency. The international investor, however, can usually only provide local currency if it can itself be hedged (take away the currency risk). Hence, TCX provides a solution and shifts the currency risk to those that can bear it.

In many instances, a mismatch exists between the currency of an MSME's payment obligations and the currency in which the income is generated. A real depreciation of the respective local currency vis-#-vis the foreign currency will cause difficult or even distress financial situations for those MSMEs. Where hedging is not available through commercial providers TCX steps in and offers a solution. The overall goal is to offer local currency solutions, thereby taking away the currency risk from those MSMEs that are not well placed to absorb currency fluctuations.

Inclusive and sustainable economic growth is spurred

Jobs are created through growth possibilities for MSMEs that benefit from local currency investments

Currency crises are absorbed

Principaux résultats attendus:  

Loans to local enterprises are shielded from currency volatility

Development finance loans are converted into local currency