The African Development Bank Group (AfDB) has approved a USD 25 million equity investment in The Currency Exchange Fund (TCX), a specialized global institution that provides long-term local currency hedging solutions in emerging and frontier markets. The move represents a strategic effort to strengthen African capital markets, reduce debt vulnerabilities, and expand access to financing in fragile and underserved economies.
Strengthening Africa’s Access to Local Currency Finance
TCX operates as a development-focused fund, offering tailor-made hedging instruments that enable local currency lending in countries where conventional hedging markets are underdeveloped or absent. By helping borrowers protect themselves from foreign exchange (FX) volatility, TCX reduces the financial risks associated with hard currency borrowing, particularly in economies with unstable exchange rates.
The AfDB’s investment will:
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Bolster TCX’s capital base, improving its risk-bearing capacity.
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Expand TCX’s reach across illiquid and less liquid African currencies.
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Mobilize additional Development Finance Institutions (DFIs) and private investors.
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Help mitigate the FX risks faced by micro, small and medium-sized enterprises (MSMEs), infrastructure developers, and public institutions.
According to the Bank, the initiative is a critical step in addressing the root causes of debt distress, which often stem from mismatches between hard currency debt obligations and local currency revenues.
Building on a Strong Track Record
Since its inception, TCX has hedged more than USD 17 billion in notional amounts, including over USD 4 billion across 31 African countries. Around 18% of its global outstanding portfolio currently focuses on fragile and low-income markets, where access to financial risk management tools is most limited.
The AfDB’s participation is expected to unlock additional volumes of hedging in priority sectors such as:
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Public debt management (supporting Debt Management Offices and development banks).
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Infrastructure and energy access projects.
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Microfinance and SME development, vital for job creation and economic inclusion.
Voices from AfDB and TCX
Ahmed Attout, Director of AfDB’s Financial Sector Development Department, emphasized the significance of the investment:
“This investment in TCX marks an important milestone in the Bank’s effort to deepen African capital markets and address the root causes of debt distress. It will unlock local currency financing for MSMEs, infrastructure, and many sectors across Africa.”
He added that the transaction is part of the Bank’s broader strategy to promote innovative financial solutions that improve access to sustainable financing.
Ruurd Brouwer, Chief Executive Officer of TCX, welcomed AfDB’s equity stake:
“We are thrilled to welcome AfDB to TCX’s capital base, joining fellow DFIs, impact investors, and governments that support our local currency hedging solution. This partnership will protect borrowers from currency risk and promote the development of African capital markets.”
Aligned with AfDB’s Long-Term Strategy
The operation aligns with the AfDB’s Ten-Year Strategy (2024–2033), which prioritizes financial sector development and resilience. It complements the Bank’s wider capital markets strategy, including initiatives such as:
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Supporting local currency bond issuance to diversify financing sources.
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Offering Partial Credit Guarantees to reduce investor risk.
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Expanding private sector local currency lending to strengthen domestic markets.
Development Impact and Resilience
By reducing FX exposure, the investment aims to strengthen Africa’s ability to manage debt sustainably, attract private sector investment, and expand inclusive financing. This is especially critical for fragile states and low-income countries, where external shocks can quickly escalate into debt crises.
Ultimately, AfDB’s investment in TCX underscores its commitment to:
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Building resilient African capital markets.
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Promoting de-risking mechanisms for the private sector.
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Expanding access to local currency finance to foster inclusive and sustainable growth.
As global volatility and tightening financial conditions continue to challenge developing economies, such measures are expected to play a decisive role in stabilizing African economies and supporting long-term development.
