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Today, The German Federal Ministry for Economic Cooperation and Development (”BMZ”) invested USD 27 million in The Currency Exchange Fund (“TCX”). The investment will support TCX in increasing its offering of local currency solutions in emerging markets, with a specific focus on Africa.
At present, many small and medium sized enterprises, as well as projects in infrastructure and energy, are still financed in USD or EUR. As the borrowers earn their income in local currency, they are exposed to substantial currency risk. As many emerging market currencies are volatile, the company, and often entire economic sectors, are exposed to the volatility of international financial markets. This makes them vulnerable to factors beyond their control.
Ruurd Brouwer, CEO of TCX: “We are very pleased with the strong and continued support from our partner BMZ. Especially in a year where TCX is expecting record breaking growth on the back of increasing demand for local currency financing. I believe we are on a track where ultimately local currency will become the standard in financing emerging market entrepreneurs and USD funding will become the exception. This year we saw the start of an important change towards local currency in the financing of infrastructure and renewable energy in developing countries. There is an undeniable economic and ethical rationale for this trend to continue.”
TCX shields international lenders and their local borrowers in emerging and frontier markets from exchange rate volatility. By swapping hard currency funding into a local currency loan, TCX makes debt financing predictable for the borrower. TCX enables lenders to offer the right product, allowing local counterparties to focus on growing their business rather than managing exchange rate risk.
