MICROCAPITAL BRIEF: Risk Management Initiative in Microfinance (RIM) Launched

MFX Solutions, a US-based company that provides currency hedging solutions for microfinance institutions (MFIs) and microfinance investment vehicles (MIVs), recently announced that it is one of eight partners launching the Risk Management Initiative in Microfinance (RIM), which will aim to mitigate challenges MFIs face in risk management; promote best practices; institute global MFI risk management standards; and protect MFIs and their clients from internal and external risks.RIM will assist MFIs via activities including strategy building for management, risk management training for field consultants and information and idea sharing among technical experts. In addition, “RIM will develop a graduation model for risk management practices in microfinance institutions as well as create an industry mapping of risk and promote partnerships between risk management service providers” [1].

The initiative was launched in partnership with Appui au Développement Autonome (ADA), a Luxembourg-based nonprofit organization; Calmeadow, a Canadian NGO; Center for Financial Inclusion (CFI), a branch of the US-based nonprofit Accion; Mennonite Economic Development Associates (MEDA), a Canada-based nonprofit; Microfinanzas Srl, an Italian microfinance consulting firm; Oikocredit, a Dutch cooperative investment fund; and Triple Jump, a Netherlands-based microfinance investment manager.

MFX has raised USD 13 million and hedges ten to 18 times that amount. The organization has a USD 20 million guarantee from the Overseas Private Investment Corporation, an agency of the United States government acting to promote international economic development.

By Jennifer Young, Research Associate

About MFX Solutions
MFX Solutions is a US-based microfinance currency risk solution company that was started by Accion, the Calvert Foundation, MicroRate, Global Partnerships and Calmeadow Foundation in 2008. MFX provides hedging products and risk management education to entrepreneurs in low-income countries. MFX has raised USD 13 million and hedges 10 to 18 times that amount. The organization has a USD 20 million guarantee from the Overseas Private Investment Corporation, an agency of the United States government acting to promote international economic development.

About Appui au Développement Autonome (ADA)
Founded in 1994, Appui au Développement Autonome (ADA) is a nonprofit organization based in Luxembourg. ADA’s activities include developing new financial products, assisting in the capacity building of microfinance institutions (MFIs) and improving information on and awareness of microfinance activities. As of December 31, 2009, ADA reported total assets of EUR 3.7 million (USD 5.4 million). Newer financial data on ADA is not available as of 2012. ADA works with 25 microfinance institutions in Africa, Asia and South America.

About The Center for Financial Inclusion
The Center for Financial Inclusion at Accion (CFI) was established in 2008 within US-based nonprofit Accion to promote universal financial access. The center works to bring together relevant parties to perform research, produce publications and develop campaigns to further its goal of increasing financial inclusion. The mission of Accion is to alleviate poverty by providing financial products such as microenterprise loans and business training. As of 2011, Accion reports total assets of USD 325 million and an active loan portfolio of USD 5.5 billion serving 5.1 million borrowers.

About Mennonite Economic Development Associates:
Mennonite Economic Development Associates (MEDA) is a Canada-based nonprofit dedicated to helping families who are living in poverty in the developing world through investment, primarily microfinance. MEDA has 227 partners and operates in 56 countries as of 2013. MEDA’s history dates back to 1953 when a group of Mennonite businessmen invested in a dairy farm in Paraguay. MEDA’s Product Lines include the following: (1) Investment fund development, establishing private investment as an effective solution to global poverty; (2) member engagement, helping their members strengthen faith-work development connections in their own lives and in all the places touched by their work; (3) microfinance, providing innovative and sustainable access to savings and credit for the poor; and (4) production & marketing linkages, providing innovative and sustainable access to markets for small producers and/or giving the poor better access to products that serve their basic needs. As of 2012, MEDA reported total assets of USD 180 million and a client-base of 14 million people.

About Oikocredit
Oikocredit is a Dutch cooperative investment fund comprised of church groups, cooperatives and individual investors. Established in 1975, it works in 70 countries, investing mainly in microfinance institutions (MFIs), as well as trade cooperatives, fair trade organizations and small and medium-sized enterprises (SMEs) in the developing world. As of year-end 2010, Oikocredit reported USD 900 million in total assets and 790 active investees, of which 596 were MFIs.

About Triple Jump
Triple Jump was founded in 2006 to support the expansion of microfinance institutions (MFIs) through the provision of capital and advisory services. Triple Jump was established by the NOTS Foundation, a Dutch development organization; Oxfam Novib, a Dutch organization for international cooperation and development; and ASN Bank, a “sustainability-driven” Dutch bank. Its shares are divided among these organizations and Triple Jump’s management team. Triple Jump is comprised of Triple Jump Fund Management (TJFM) and Triple Jump Advisory Services (TJAS). TJFM provides its clients with four investment options: hard and local currency loans, equity, guarantees and subordinated loans. TJAS is an independent foundation that provides consulting services and technical assistance to tier-3 and tier-4 MFIs. Triple Jump manages five microfinance investment funds, with total assets approximately equivalent to USD 300 million as of March 31, 2011. Its investments span 132 MFIs in 52 emerging markets in Latin America, Eastern Europe, Africa and Asia.

Sources and Additional Resources

[1] MFX News Release, “Risk Management Initiative in Microfinance,” http://www.mfxsolutions.com/?mfx_news=risk-management-initiative-in-microfinance-rim

MicroCapital Story, March 1, 2013, ”MICROCAPITAL BRIEF: MFX Solutions Releases French Version of Comprehensive Asset/Liability Management (CALM) Tool for Microfinance Institutions,” https://www.microcapital.org/microcapital-brief-mfx-solutions-releases-french-version-of-comprehensive-assetliability-management-calm-tool-for-microfinance-institutions/

MicroCapital Story, January 24, 2011, “MICROCAPITAL BRIEF: MFX Solutions Publishes ‘Risky Business: An Empirical Analysis of Foreign Exchange Risk Exposure in Microfinance’,” https://www.microcapital.org/microcapital-brief-mfx-solutions-publishes-risky-business-an-empirical-analysis-of-foreign-exchange-risk-exposure-in-microfinance/

MicroCapital Universe Profile: MFX Solutions, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MFX+Solutions+LLC+%28MFX%29

MicroCapital Universe Profile: Appui au Développement Autonome (ADA), https://www.microcapital.org/microfinanceuniverse/tikiindex.php?page=Appui+au+D%C3%A9veloppement+Autonome+%28ADA%29

MicroCapital Universe Profile: The Center for Financial Inclusion, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Center+for+Financial+Inclusion+%28CFI%29

MicroCapital Universe Profile: Menonite Economic Development Associates, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Mennonite+Economic+Development+Associates+%28MEDA%29

MicroCapital Universe Profile: Oikocredit, http://microcapital.org/microfinanceuniverse/tiki-index.php?page=Oikocredit

MicroCapital Universe Profile: Triple Jump, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Triple+Jump

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