One of the barriers that clean energy enterprises face in frontier markets is exposure to currency risk resulting from hard currency financing of SMEs, which presents a major threat to their long-term financial sustainability. To tackle this issue more effectively, REEEP is joining forces with The Currency Exchange Fund (TCX) in a new partnership.
TCX was founded in 2007 by a group of development finance institutions (DFIs), impact investors and donors to create a solution for currency risk associated with DFI financing to borrowers in emerging and frontier markets. A solution which was scarcely available and, in many countries, non-existent.
Since its inception, TCX has enabled the provision of some USD 8 billion of investments in local currency, facilitating much needed debt finance, while shielding local economies, enterprises and households from currency volatility. By hedging the currency risk, TCX contributes to more sustainable development in emerging and frontier markets.
Ruurd Brouwer, CEO of TCX, says: “TCX very much welcomes REEEP’s initiative to work with us to promote sustainable local currency finance for clean energy SMEs in developing countries. We believe this is a vital building block for establishing a long-term resilient energy sector”.
‘’REEEP and TCX have a common objective’’ says Magdalena Kouneva, Director General of REEEP, “We are looking forward to joint activities with TCX to raise awareness in the sector and enable solutions.’’
We share the goal of promoting access to modern, clean energy systems and services to foster a sustainable energy market in developing countries under a local currency framework. In cooperation with other industry actors, REEEP and TCX will develop and implement facilities targeting international lenders to ensure local currency is provided to local financial institutions and/or directly to clean energy SMEs. Final beneficiaries will be projects and companies in sectors such as smart cities, cross-sector systems (including knowledge management and agri-food value chains), and energy access and rural electrification in developing countries.
Through this partnership, REEEP and TCX will cooperate with international donors, developmental financial institutions, investors and local financial institutions within our networks.