The Currency Exchange Fund (TCX) is a $1 billion fund invested in by several European governments and a wide range of development finance institutions and impact investors. TCX’s mission is to offer development lenders currency hedging in markets where no commercial hedging options currently exist. This makes it virtually the only option for hedging in the neediest, yet highest risk markets. As an investor in TCX, MFX receives access to hedging capacity in a wide range of exotic currencies allowing it to re-hedge the risk it takes with its clients in the same way an insurance company uses reinsurance. By offsetting the currency risk on its own balance sheet, MFX can build a portfolio of hedges with microfinance clients and remain a strong counterparty for the industry.
MFX is supported by a AAA $168 million credit guarantee from the US International Development Finance Corporation (DFC). Our DFC guarantee allows us to trade on favorable terms with TCX and commercial banks, while minimizing MFX’s liquidity requirements. The DFC guarantee is the key reason we can trade on attractive collateral terms with our clients. Through its partnership with MFX, DFC is promoting safer lending practices in the impact investment industry by removing the prohibitive costs of collateral for impact lenders and borrowers hedging their currency risk.
As of December 2021, FinDev Canada provides liquidity and credit support to MFX, in an amount up to $50 million. The financing includes an innovative US$45 million collateral facility, of which US$30 million will be insured by the AXA XL Group of companies, a group of leading private sector insurance companies.
Proparco invested $7 million in equity in MFX in December 2021, becoming its second-largest shareholder and providing MFX with solvency and liquidity to support its guarantee with FinDev Canada. Proparco is a subsidiary of Agence Française de Développement (AFD) focused on private sector development. It has been promoting sustainable economic, social and environmental development practices for over 40 years. Proparco provides funding and support to both businesses and financial institutions across Africa, Asia, Latin America and the Middle-East. Proparco finances businesses that are instrumental in creating decent jobs that pay decent wages, in supplying essential goods and services and in battling climate change.
Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), one of MFX’s Banking Counterparties, offers MFX and its clients excellent pricing and liquidity in Latin American currencies. BBVA began trading with MFX in March 2022. Headquartered in Madrid, BBVA is one of the world’s largest banks, and traces its roots back over 160 years, to the founding of the Banco de Bilbao in 1857.
The Australia and New Zealand Banking Group Limited (ANZ) provides liquidity for MFX’s clients, primarily in Asian markets, but also in various other currencies. ANZ was founded in 1835 and is based in Melbourne, serving as Australia’s fourth largest bank based on market capitalization size.
DLM Finance was founded in 2012 by individuals heavily involved in the set-up of The Currency Exchange Fund (“TCX”, also an MFX partner). DLM Finance structured itself to offer outsourcing services for the microfinance market from both a currency hedging perspective and loan administration and servicing perspective as well as provide experience in implementing treasury systems and processes. After a successful partnership with TCX, MFX became a partner to DLM in 2009. DLM Finance are the creators of DLM Trade Manager, which is a web-based trade operating system that complies with EMIR regulations. DLM also provides support to our back-office department in the area of valuations, risk management, and functional application management.
Standard Chartered PLC, ranks among the top 20 companies in the FTSE-100 by market capitalisation. The London-headquartered Group has operated for over 150 years in some of the world’s most dynamic markets, leading the way in Asia, Africa and the Middle East. MFX’s Partnership with Standard Chartered allows us to help our clients access hedging in a wide variety of currencies.
MFX evaluates the credit risk of its clients with a rigorous, independent credit evaluation process conducted by Luminis. Luminis, the first MFI rating agency and a leader in credit evaluation of MIVs, manages MFX’s counterparty credit evaluation based on a customized credit scoring system developed for MFX. By partnering with Luminis for this function, MFX avoids conflict of interest and assures consistency of pricing for clients. To read more about Luminis’ evaluation please visit our section on Becoming a Client.
MFR offers a range of rating products to microfinance institutions (MFIs), to investors, regulators and networks. MFX is partnering with MFR to help with the credit due diligence process, particularly with MFIs. To read more about MFX’s credit due diligence evaluation please visit our section on Becoming a Client.