News

FMO co-funded initiative enables growth of micro finance sector

Recently MFX Solutions launched its operations. The Washington D.C. based fund will help micro finance institutions (MFI’s) to mitigate their currency risk by providing hedges to them. By reducing or eliminating the currency risk MFX Solutions will help the industry move to a more sustainable growth model. The start up of MFX was in part made possible by a US$ 150.000 Capacity Development grant. FMO is managing the Capacity Development Program on behalf of the Dutch Ministry of Foreign Affairs.

Offsetting lender's risk
Many MFI’s bear currency risk on their balance sheet due to the fact that they borrow hard currency loans from international lenders and extend local currency loans to their microfinance clients. MFX will, for the first time, be making modern hedging instruments accessible to microfinance lenders in developing markets where they need it most. By offsetting lender's risk and thereby lowering their costs, MFX aims to unlock hundreds of millions of dollars in local currency loans to under-served markets. MFX has secured $13 million from 17 investors in its first round of financing.

TCX - Currency Exchange Fund
FMO was one of the first development finance institutions to recognize the risk this posses to MFI’s. FMO has over 30 years of experience in local currency lending with its Micro & Small Enterprise Fund (MASSIF) and its predecessors. FMO also established the US$ 560 million Currency Exchange Fund (TCX) that provides hedges for local currencies to stimulate local currency lending by international borrowers in developing countries. MFX Solutions will work closely together with TCX. 

Highly needed service
Henk Nijland, manager Micro & Small Enterprise Finance at FMO comments: “MFX will offer a highly needed service. The majority of MFI’s runs a high foreign exchange risk, which is only increasing under current market circumstances. MFX will be able to help them in reducing these kind of risks. FMO perceives MFX as a vital step in the development of micro finance worldwide. A step parallel to the development of our own TCX or MASSIF Funds.”

About FMO
The Netherlands Development Finance Company (FMO) is the international development bank of the Netherlands. FMO invests risk capital in companies and financial institutions in developing countries. With an investment portfolio of € 4.2 billion, FMO is one of the largest bilateral private sector development banks worldwide. Thanks in part to its relationship with the Dutch government, FMO is able to take risks which commercial financiers are not - or not yet - prepared to take. FMO's mission: to create flourishing enterprises, which can serve as engines of sustainable growth in their countries.
 
Press contact:
Patrick Harms
Communications Officer a.i. (PR)
M: +31  642 054 041
E: phm@fmo.nl