Financial risk interview with Senior Advisor of The Currency Exchange Fund

2557750930 16ca19f893 b(Image source: dirvish/Flickr)“The solar off-grid grid space is fascinating. Like telecom, it is an example where development and private interests are fully compatible”

Exclusive interview with Harald Hirschhofer, senior advisor, The Currency Exchange Fund (TCX), The Netherlands. Harald is organising a TCX Risk Mitigation workshop during the F&I Forum at African Utility Week, taking place in Cape Town from 16-18 May, and will address attendees on “Understanding of risks and their pricing – how can the supply of long-term local currency financing and hedging be improved?“

Let’s start with some background about your respective organisations and your role there?

TCX is a unique global provider of innovative currency hedging solutions. We have a very strong development focus and over the past 10 years we have protected millions of borrowers in frontier and emerging markets from the horrible financial consequences on their firm and household budgets from sudden exchange rate depreciations. I am working very closely with our CEO to develop new strategic initiatives to promote local currency financing, both within the domestic financial system as well as cross border from DFIs or private investors.

What is the most exciting project you have worked on in Africa so far?

The solar off-grid grid space is fascinating. Like telecom it is an example where development and private interests are fully compatible. Mobile banking applications have created new credit channels and even the poorest can now build a credit history and gradually accumulate assets. However, the gap between the local currency receivables and the hard-currency funding of the sector are still an Achilles heel. TCX is working with the leading firms, such as M-KOPA, and industry associations like GOGLA to reduce such systemic risks. These firms should be financed in local currencies, or if that is not possible, reduce the fx mismatch. 

What did you learn from the investments that did not do so well?

Well, TCX does not provide funding. We are providing risk management tools like swaps and forwards to all kind of investment projects around the world. Like with any other type of insurance provider, having losses is part of our business. Our losses protect our clients. For example, we lost more than US$40m in one day when the Central Bank of Azerbaijan could not defend its peg anymore, but that probably saved thousands of local firms and borrowers from heavy financial difficulties.

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