EUR 40m EIB support to address currency barriers to economic growth

The European Investment Bank has become a member of The Currency Exchange Fund, TCX, a unique hedging vehicle that will allow the EIB to enhance its long-term lending in local currencies in Africa, the Caribbean and the Pacific. 

Europe’s long-term lending institution agreed earlier this week to take a EUR 40 million equity investment in TCX. In turn, TCX will provide the EIB and its clients with at least the same amount of local currency, hedged for high-development operations and to benefit smaller companies. 

At present, long-term investment by smaller companies is hindered in many parts of Africa due to the absence of long term financing in local currency. SME’s funded with USD or EUR are exposed to substantial currency risks. Following the EIB’s new engagement, TCX will increase business activities to maximize access to medium and long-term local currency finance by local financial institutions, companies and local infrastructure investment. TCX provides local currency swaps for both international financial institutions and financing institutions in emerging markets, such as microfinance bodies.

“The European Investment Bank is committed to supporting private sector development and improving access to finance. This new engagement with TCX will strengthen investment by smaller companies in 17 countries across sub-Saharan Africa and in emerging markets around the world. TCX has made a valuable contribution to development finance over many years and the European Investment Bank looks forward to working with TCX in the years to come.” said Pim van Ballekom, European Investment Bank Vice President.

Ruurd Brouwer, CEO of TCX stated that “TCX is thrilled to welcome the European Investment Bank as shareholder. We see it as a confirmation of EIB’s choice to maximize access to finance for SME’s in their own currency, thereby minimizing the risks for companies in Africa, the Caribbean and the Pacific in a volatile economic environment. We are proud that this happens at a moment where TCX’s product offering already has reached 50 exotic currencies for which there is no commercial market”.       

Following the new engagement, the European Investment Bank will become a member of TCX and this will allow the EIB to increase provision of loans in currencies not normally traded on money markets.

The European Investment Bank’s equity stake will be financed under the Impact Financing Envelope of the ACP Investment Facility, reflecting the high-development impact expected from the new support.

The European Investment Bank is the world’s supranational bond issuer with a focus on EUR, USD and GBP as core currencies and has issued in 27 currencies from all over the world in the last five years.