You are currently browsing the tag archive for the ‘Currency Exchange Risk’ tag.

30784872334_b499dfc281_mThe following is part of a blog series spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s Africa Board Fellowship program.

Africa Board Fellowship graphic harvest illustration

By Danielle Piskadlo, Director, CFI

In recent years, some African countries have experienced slower economic growth and less stability in their currencies. This deterioration in macroeconomic conditions has presented challenges for financial service providers (FSPs) seeking to serve the base of the pyramid and improve financial inclusion. Some ways macroeconomic conditions impact FSPs include:

  • Higher operational expenses (e.g., imported IT equipment and software; office leases and technical services invoiced in foreign currency)
  • Increase in non-performing loans as small businesses have had fewer growth opportunities
  • Higher cost of funds (both deposits and debt)
  • Reduced access to debt from international and local providers
  • Decrease in revenue or tighter margins

We’re talking to Africa Board Fellowship (ABF) alumni to share their experiences dealing with deteriorating macroeconomic conditions.
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> Posted by Kanika Metre

seattletimeslogo_homeThe July 7 debut of Microfinance Currency Risk Solutions, or MFX Solutions–an initiative to mitigate foreign exchange risk backed by ACCION’s Frontier Investments Group (FIG) and over 30 other microfinance institutions–was featured in an article published yesterday in The Seattle Times, titled “Global Partnerships invest in new currency hedge firm.”

As The Seattle Times article notes, the industry-backed initiative is the result of a three-year effort and was created to “apply modern hedging instruments to microfinance lending, analyzing and quantifying currency risk and mitigating that risk by trading among a basket of currencies.” As the political crisis continues in Honduras, it is easy to see why a company that is able to bridge the gap between microfinance investors and the risk of deprecation of foreign currencies has become increasingly vital in order to protect entrepreneurs at the bottom of the pyramid from picking up increasing transaction costs.

To see what Brian Cox, executive director of MFX Solutions, posted earlier this year on the Center for Financial Inclusion Blog about goals for the initiative in 2009, click here.

To read the full press release of the newly launched MFX Solutions, Inc., including a quote from Monica Brand, Principal Director of the Frontier Investments Group, click here.

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> Posted by Brian Cox

This is a guest post by Brian Cox, executive director of Microfinance Currency Risk Solutions. MFX Solutions is the result of a collaborative effort to address the growing problem of currency risk in the microfinance industry. To learn more, visit their website at www.mfxsolutions.com.

Dear friends and stakeholders of MFX Solutions:

mfxHappy New Year from all of us at MFX (something I can now say without having to invoke the royal We). I wanted give you a short update on our progress and introduce our new management team.

We remain on track to launch operations in early spring. The last piece of the puzzle for MFX to become fully operational is securing our OPIC guarantee. When that is finalized, we will make our investment in TCX and open our doors for business as the first currency hedging facility designed exclusively for microfinance. Our initial capital will allow us to hedge roughly $40M in microfinance loans through swaps and forwards in most emerging and developing market currencies.

MFX also recently secured a new $200,000 grant to support our educational program. we will be building a new web-based interactive tool for MFI managers to help them quantify their currency risk and compare hard and local currency funding options. We will look for partners who can help disseminate Read the rest of this entry »

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.