The African Development Bank Group (AfDB) has approved a $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.
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 is expected to bolster TCX’s capital base, improving its risk-bearing capacity, expand TCX’s reach across illiquid and less liquid African currencies and mobilize additional Development Finance Institutions (DFIs) and private investors.
It will also 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.
Since its inception, TCX has hedged more than $17 billion in notional amounts, including over $4 billion across 31 African countries.
Around 18 per cent 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 public debt management (supporting Debt Management Offices and development banks), infrastructure and energy access projects and microfinance and SME development, vital for job creation and economic inclusion.
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.”
The operation aligns with the AfDB’s Ten-Year Strategy (2024–2033), which prioritizes financial sector development 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.
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.
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