MICROCAPITAL.ORG STORY: MFX Solutions Closes First Currency Hedge Transaction; $4 million Currency Swap With MicroVest

MFX Solutions Inc., a company providing currency hedging solutions designed specifically for microfinance, closed its first hedging transaction, a USD 4 million currency swap with MicroVest I, LP. The cross-currency swap transaction allowed MicroVest I, a Washington DC-based microfinance investment fund, to make a USD 4 million, 3-year loan in Columbian pesos to Fundacion Mundo Mujer, a Columbian-based microfinance institution. [3]

MFX Solutions Inc. is a microfinance industry initiative providing currency hedging and analytic tools that aim to meet the specific needs of microfinance lenders. MFX aims to offer MIVs products like currency swaps, which will in turn provide loans in local currency to MFIs in various countries around the world. [1] MFX expects to support lending in more than 50 countries worldwide, with a focus on Africa and Latin America. MFX is 74 percent owned by U.S. entities. U.S. shareholders include Omidyar Network Fund Inc and Accion International. Stichting Hivos-Triodos Fonds and Stichting Triodos-Doen, two funds managed by Triodos Investment Management BV of The Netherlands, each owns 8.3 percent of MFX, and INCOFIN of Belgium owns 6 percent.

MFX is partially supported by a USD 20 million credit guarantee from the U.S. Government’s Overseas Private Investment Corp (OPIC), and independent government agency assists U.S. companies that are working in less developed countries and areas by providing financing, political risk insurance, and investment funds. OPIC expects MFX to mobilize nearly USD 140 million in lending to micro-entrepreneurs by the summer of 2010, and more than 400,000 microfinance loans over five years. MFX is also a partner with The Currency Exchange Fund (TCX), which provides hedging in exotic currencies to support development lending. [4] Items [7]-[10] of the bibliography link to more articles about MFX, including an interview with Executive Director Brian Cox.

MicroVest is a global financial intermediary that provides financial capital for microfinance “banks”. MicroVest was founded by three nonprofit institutions, CARE, MEDA and Seed Capital Development Fund. According to the 2009 Annual Report, MicroVest has funded 39 microfinance institutions (MFIs) and provided funding of USD 70 million, reaching an estimated 53,000 clients. [2]

Fundacion Mundo Mujer (FMM) is a non-profit MFI founded in Colombia in 1985. According to the MIX Market, FMM has total assets of USD 154 million, a return on assets of 10.4 percent and a return on equity of 30.6 percent. [5]

By Kenny Kline, Research Associate

Additional Resources:

[1] MFX Solutions

http://www.mfxsolutions.com/

[2] MicroVest

http://microvest.webcomand.com/docs/2009-06-01-27.pdf

[3] OPIC Press Release

http://www.opic.gov/news/press-releases/2009/pr071409

[4] OPIC website

http://www.opic.gov/sites/default/files/docs/mfx_global_smef.pdf

[5] Fundacion Mundo Mujer

http://www.fmm.org.co/