AfDB Invests $25m in TCX To Expand Local Currency Hedging in Africa

The African Development Bank (AfDB) has approved a $25 million equity investment in The Currency Exchange Fund (TCX) to strengthen access to long-term local currency hedging solutions across emerging and frontier markets, particularly in Africa.

The Bank said the new capital injection would increase TCX’s ability to absorb risk and extend its reach into illiquid African currencies where hedging options are often limited or unavailable.

According to AfDB, the move is expected to reduce the exposure of African borrowers to foreign exchange volatility, which has been a major driver of debt distress on the continent. By enabling more transactions in local currency, the initiative aims to better align borrowers’ revenue streams with their debt obligations, while also encouraging greater private and development finance institution (DFI) participation.

“The Bank’s investment will crowd in other DFIs and private investors, deepen Africa’s participation in global capital markets, and foster sustainable growth by addressing the mismatch between debt repayments and income in local currency,” the statement read.

Ahmed Attout, AfDB’s Director of Financial Sector Development, said the investment represents an important step in the Bank’s efforts to strengthen African capital markets and reduce debt vulnerabilities.

“This investment in TCX marks an important milestone in the Bank’s strategy to address the root causes of debt distress in Africa,” Attout noted. “Through this partnership, we will open up local currency financing opportunities for MSMEs, infrastructure projects, and other critical sectors.”

TCX’s chief executive officer, Ruurd Brouwer, welcomed the AfDB’s participation, saying it would boost the Fund’s capacity to shield borrowers from exchange rate risks.

“We are delighted to have the African Development Bank join TCX’s capital base,” Brouwer said. “It is the beginning of a close collaboration to protect AfDB’s clients in both the public and private sectors from currency volatility and to advance the development of African capital markets.”

Since its establishment in 2007, TCX has provided more than $17 billion worth of hedging products, including $4 billion across 31 African countries. The Fund is backed by several global development finance institutions and banks, including FMO, the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and Germany’s KfW.

The AfDB explained that the investment is consistent with its 10-year strategy (2024–2033), which emphasises promoting resilient economies and expanding access to finance. It also complements ongoing initiatives such as support for local currency bond markets, credit enhancement instruments, and private sector lending in domestic currencies.

With the new partnership, African borrowers—particularly small businesses and infrastructure developers—are expected to benefit from improved access to stable, long-term financing insulated from foreign exchange shocks.