MONTREAL, Jan. 13, 2022 /PRNewswire/ — FinDev Canada, US DFC, Proparco and AXA XL announced they are providing an innovative financing solution to MFX Currency Risk Solutions (MFX) to enhance its liquidity and help position it for its next phase of growth. MFX is a socially-oriented company that supports impact investing in emerging and developing countries by providing hedging products that mitigate currency exchange risk.
FinDev Canada will provide financing of up to US$ 50 million in parallel to an existing US$ 100 million guarantee issued by US DFC. The financing includes an innovative US$ 45 million collateral facility, of which US$ 30 million will be insured by the AXA XL Group of companies, a group of leading private sector insurance companies. MFX’s solvency and liquidity will be further bolstered by a direct equity investment from Proparco of US$ 7 million. Proparco will become MFX’s second largest shareholder.
MFX supports an underserved segment of the development finance industry, helping to address a fundamental barrier to local development: the burden of currency risk management. Created in 2009, MFX helps impact investors and recipients of development financing, such as microfinance institutions, to efficiently hedge their currency risk. Since inception, MFX has worked with international financial institutions to hedge more than US$ 4.5 billion in loans to micro and small businesses in developing countries, covering more than 55 currencies.
MFX now offers a diverse product mix designed to make currency hedging more efficient and accessible to impact investors across many sectors – including renewable energy, agriculture, health, and housing. MFX also offers training and advisory services to enable investors and other industry stakeholders to better understand currency risk, define hedging strategies and develop comprehensive currency risk management approaches.
“We are proud to be part of this ground-breaking partnership between development finance institutions and private insurance to support MFX, a unique entity that plays a vital role in providing currency hedging services not commonly available in many markets,” said Paulo Martelli, VP and Chief Investment Officer of FinDev Canada. “This transaction supports our goal to strengthen local markets by promoting a greater diversity of financial service providers as well as increased access to finance for those underserved, such as microenterprises, small and medium-sized businesses and women entrepreneurs.”
”This transaction is a landmark for the impact investment industry,” said Brian Cox, CEO of MFX. “FinDev Canada and Proparco’s support will allow MFX to serve the highest growth impact sectors like clean energy and housing that increasingly have a need to lend in local currency. The addition of AXA XL to share risk alongside FinDev Canada and DFC means for the first-time private insurance will be deployed to support local currency impact lending.”
“DFC welcomes this new collaboration from FinDev Canada, Proparco, and AXA XL in support of MFX alongside DFC’s existing loan guaranty, expanding the financing and financial tools available to help boost MFX’s critical mission,” said Jim Polan, VP of DFC’s Office of Development Credit. “MFX is advancing development impact in emerging markets around the world by providing financing for small businesses in local currencies, promoting access to finance among underbanked communities.”
“As one of the world’s largest insurers, AXA XL believes our purpose is ‘to act for human progress by protecting what matters,'” explained Jeff Abramson, Underwriting Manager for Special Risks in AXA XL’s Political Risk and Credit Group. “That’s why we’re excited to be part of this pioneering transaction, partnering with FinDev Canada to enhance MFX’s ability to fulfill its mission and catalyze impactful investments in emerging and developing markets.”
“Proparco is proud to join the shareholders of MFX and to team up with FinDev Canada, US DFC and AXA XL to support MFX’s critical role in the local currency financing chain. MFX’s unique proposition is essential to increase local currency funding to local financial institutions, in particular microfinance institutions, thus benefiting countless micro-entrepreneurs in emerging and developing countries”, said Guillaume Barberousse, Head of Proparco’s Banks and Financial Markets Division.
Local market development
MFX provides impact investors or recipients of development finance with the ability to hedge local currencies with little or no collateral. Collateral requirements can tie up funds otherwise available for development finance. The loan to MFX is expected to lead to a greater flow of international capital into critical sectors of national economies in emerging and developing markets.
Women’s economic empowerment
MFX was created to address a critical need in the microfinance space. Microfinance investment vehicles and microfinance institutions (MFIs) represent a large proportion of its clientele. Many of these MFIs serve a majority of, or sometimes exclusively, women by providing access to financial services, especially microenterprise loans. As such, their currency hedging products have a significant indirect impact on women’s economic empowerment.
Development Finance Institutions and COVID-19
FinDev Canada has a mandate to support companies that have a presence in the areas most affected by the COVID-19 pandemic. Investments will help guarantee that developing markets continue to have liquidity, providing important support for the recovery of the economic and social consequences of this crisis.
About FinDev Canada
The Development Finance Institute Canada (DFIC) Inc., operating under the FinDev Canada brand, is a Canadian institution dedicated to providing financial services to the private sector in developing countries with the aim of combating poverty through economic growth by focusing on three main topics: economic development through job creation, women’s economic empowerment, and climate change mitigation. The Development Finance Institute Canada Inc. is a wholly owned subsidiary of Export Development Canada (EDC).
Based in Washington DC, MFX Currency Risk Solutions is a socially-oriented company that supports impact investing with affordable hedging products and risk management education. MFX believes that when currency and market risks are managed effectively, development lending can reach more entrepreneurs at the bottom of the pyramid, more sustainably, at a lower cost.
U.S. International Development Finance Corporation (DFC) is America’s development bank. DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world today. We invest across sectors including energy, healthcare, critical infrastructure, and technology. DFC also provides financing for small businesses and women entrepreneurs in order to create jobs in emerging markets. DFC investments adhere to high standards and respect the environment, human rights, and worker rights.
About AXA XL
AXA XL, the property & casualty and specialty risk division of AXA, provides insurance and risk management products and services for mid-sized companies through to large multinationals, and reinsurance solutions to insurance companies globally. We partner with those who move the world forward.
In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, insurance coverages are underwritten by XL Specialty Insurance Company – Canadian Branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA Group. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions. Information accurate as of January, 2022. To learn more, visit www.axaxl.com
Proparco is the private sector financing arm of Agence Française de Développement Group (AFD Group). It has been promoting sustainable economic, social and environmental development for over 40 years. Proparco provides funding and support to both businesses and financial institutions in Africa, Asia, Latin America and the Middle-East. Its action focuses on the key development sectors: infrastructure, mainly for renewable energies, agribusiness, financial institutions, health and education.
Its operations aim to strengthen the contribution of private players to the achievement of the Sustainable Development Goals (SDGs) adopted by the international community in 2015. To this end, Proparco finances companies whose activity contributes to creating jobs and decent incomes, providing essential goods and services and combating climate change. For a World in Common.
For further information: www.proparco.fr and @Proparco.
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SOURCE AXA XL