Impact investors and borrowers often have trouble finding hedging solutions that meet their needs. Banks may not want to trade with social lenders or require onerous levels of collateral. Banks also only hedge in liquid currencies, which leaves out many developing countries – for example in Sub-Saharan Africa – where impact investment is most needed.
MFX gives impact investors an easier way: with a single counterparty, investors can tap the hedging offerings of major banks as well as an exotic currency hedging pool known as The Currency Exchange Fund (TCX). MFX’s clients thereby have access to hedging in almost any currency and at a wide variety of tenors.
MFX business model diagram:
The other important part of MFX’s model is to reduce the collateral burden so impact investors can put more money toward their mission and not into a margin account. Because MFX is backed by guarantees from the U.S. government (OPIC) and the Dutch government (FMO), we can generally hedge with very low collateral requirements.
MFX works with investors, local banks, and companies across a range of impact sectors including microfinance, SME lending, renewable energy investment, low-income housing, health and sustainable agriculture. To see MFX’s list of clients click here.