MFX Solutions, a Washington-based company dedicated to managing global currency risk in the microfinance industry, has announced the launch of its operations.
MFX is the result of a three-year collaboration involving more than 30 microfinance organizations from around the world, led by Global Partnerships, Calmeadow Foundation, ACCION International, Calvert Foundation and MicroRate. It aims to assist the microfinance institutions (MFIs) and investors (MIVs) to analyze, quantify and reduce currency risk and address the disparity issue of MFIs face when they borrow in dollars or euros.
It says that MFX will be making hedging instruments accessible to microfinance lenders in developing markets and an access to free, web-based risk management tools tailored to the microfinance business model. The company claims that for its hedging clients, MFX will offer currency swap and forward contracts in high-risk currencies in regions like Sub-Saharan Africa where hedging is currently unavailable. MFX will manage its own risk through its investment in and partnership with TCX, a foreign exchange hedge fund sponsored by FMO and backed by the Dutch government.
Frank Streppel of Triodos-Doen and Hivos-Triodos Fund, said: “MFIs in developing countries often have to accept hard currency loans to finance their activities due to lack of local currency loans. This exposes them to significant risks from currency fluctuation; risk that in many cases is passed on to the microfinance client. Our investment in MFX allows us to offer more loans in local currency, which in the end significantly reduces the burden on the micro-entrepreneur.”
Matt Bannick, Managing Partner of Omidyar Network, said: “Not only will MFX enable lending to millions of poor people in remote geographies, the company will also share important information with the broader microfinance community”
