Facilitating impact investment on emerging and developing markets

MFX Currency Risk Solutions (MFX) supports an underserved segment of the development finance industry, by helping remove a fundamental barrier to local development: the problem of foreign exchange risk management. MFX was set up in 2009 and helps impact investors and recipients of development finance, such as microfinance institutions, effectively hedge their foreign exchange risk. Since it was set up, MFX has worked with international financial institutions to hedge over USD 4.5bn of loans to microenterprises and small businesses in developing countries, in over 55 currencies.

Proparco will strengthen MFX’s solvency and liquidity through a USD 7m direct equity investment. FinDev Canada will provide financing of up to USD 50m alongside an existing USD 100m guarantee issued by the US International Development Finance Corporation (DFC). The financing comprises an innovative USD 45m guarantee facility, including USD 30m which will be guaranteed by a major private sector insurance company, AXA XL.

MFX’s unique proposition is essential to increase local currency funding to local financial institutions, in particular microfinance institutions, thereby benefiting countless microentrepreneurs in emerging and developing countries. PROPARCO’s support will allow MFX to serve high-growth impact sectors, such as clean energy and housing, which increasingly need to lend in local currency. The equity provided by Proparco will make it possible to provide additional microcredits for over 160,000 people (or microenterprises) over the next 5 years.