The African Development Bank (AfDB) has approved a $25 million equity investment in The Currency Exchange Fund (TCX) to enhance local currency financing and protect African borrowers from foreign exchange risks. The AfDB’s Board of Directors endorsed the move on Thursday, positioning the bank as a key partner in TCX’s mission to expand currency hedging solutions across the continent.
TCX, headquartered in Amsterdam, is a global leader in providing long-term local currency hedging instruments, particularly in emerging and frontier markets. The fund specializes in mitigating currency risks through derivatives like cross-currency swaps and FX forwards, particularly in markets often overlooked by commercial banks.
The AfDB’s investment will strengthen TCX’s capital base, boosting its ability to provide hedging instruments for less liquid African currencies. The bank noted that currency risk remains a significant barrier for African businesses and governments, often leading to debt distress when foreign-denominated loans clash with revenues in local currencies.
AfDB’s Director of the Financial Sector Development Department, Ahmed Attout, called the investment a milestone in efforts to deepen African capital markets and address the root causes of debt distress. “This support will unlock local currency financing for MSMEs, infrastructure, and various sectors across Africa,” Attout said.
Since its inception in 2007, TCX has hedged over $17 billion globally, including $4 billion across 31 African countries. The AfDB’s backing will help increase hedging volumes in key sectors such as infrastructure, energy access, and SME development, ultimately providing more predictable financing for businesses and governments.
TCX’s CEO, Ruurd Brouwer, welcomed the AfDB’s support, emphasizing the new partnership’s potential to reduce currency risk and promote African capital markets.
This investment aligns with AfDB’s 2024–2033 strategy, focusing on financial innovation and market deepening to reduce Africa’s reliance on foreign-denominated loans and foster sustainable growth.
