WASHINGTON, DC, January 29, 2014 – Today MFX Solutions announced that it has hedged the risk on over $500 million in microfinance loans to poor entrepreneurs in developing countries since 2010. These loans have been made in more than 30 currencies and have benefited over 800,000 entrepreneurs world-wide.
MFX was established in 2009 by a group of microfinance funds and foundations to fill a clear need for more local currency lending and better currency risk management in microfinance. A 2010 study sponsored by MFX revealed that microfinance institutions carried more than $6 billion of currency exposure, the result of borrowing in foreign currency to fund their local operations.
Brian Cox, MFX’s CEO said, “This milestone demonstrates that international microfinance lenders are indeed moving toward a safer, more equitable model of lending in local currency. We are proud to be part of this transformation, and we are convinced that better risk management is key to microfinance reaching its potential.”
Eliza Erikson, chair of the board at MFX and a director of investments at Omidyar Network, stated, “We could not be more pleased with the success of MFX. When Omidyar Network first invested in 2009, we predicted that MFX would transform the industry by solving the fundamental problem of currency mismatch, which puts microentrepreneurs at serious risk. MFX has since surpassed even our most optimistic expectations, and we see the microfinance sector as just the beginning. As impact investing begins to expand, it will need partners like MFX to reach its true potential.”
Rita van den Abbeel, Chief Risk Officer at Incofin IM, a Belgium-based microfinance fund, noted, “Our partnership with MFX is critical to how we do business. Microfinance institutions (MFIs) need funding in their own currencies in order to grow safely. On the other hand we also have to respect our investors risk appetite which limits the amount of currency exposure we can take. Thanks to MFX, we are able to meet the needs of the MFIs and their micro-entrepreneur clients while effectively managing our risk as required by our investors.”
MFX offers currency swaps and forward contracts to international MSME lenders to offset the risk they take when lending in the local currency of their borrowers. MFX receives support from US and Dutch government agencies OPIC and FMO and has a partnership with the Dutch exotic currency fund The Currency Exchange (TCX).
MFX’s clients are over 50 leading microfinance and SME loan funds. In addition to providing hedging services, MFX works with emerging microfinance institutions across Africa to help them understand, quantify and manage financial risk. With better risk management in place, these institutions are better able to access international funding and accelerate growth.
MFX’s investors are major microfinance lenders, investors, raters, networks, and foundations. MFX operates globally, with headquarters in Washington, D.C. and offices in Harare, Dakar and Kampala.
Additional information is available on MFX’s website at www.mfxsolutions.com.