In September 2017, TCX celebrated its 10th anniversary by asserting that “we’ve only just begun”. This paper explains how we will continue and what we will do in the coming years.
In 2007, TCX was set up to make local-currency financing possible in the most frontier markets. At the end of 2018, we look back at an impressive track record. Through TCX, investors have realized foreign investments in local currency in 67 countries, for USD 6.5 billion in notional value. To date, the Fund has executed close to 3,000 transactions, protecting millions of individuals and households from currency risk, and preventing instability instead of fighting its consequences. While doing so, the Fund even generated a modest positive return for its investors, despite three global financial crises.
Our activities to ‘sell’ the currency risks that arise from foreign investments to private investors have become as important over time as our activities to absorb and remove these risks. Private parties have been catalyzed by TCX in rapidly increasing amounts. Since inception of the Fund, over USD 1.5 billion has been offset in 37 currencies. In 2018 alone, for every USD 100 of capital invested, TCX was able to mobilize USD 38 of private investments in frontier market currencies. This creates and deepens local capital markets and boosts the Fund’s capital efficiency.
Over the past two years, the Fund’s activities have grown by more than 50% per annum. Looking forward, we see a continuation of growth in demand for local currency. All parties in the development finance community understand that it is unthinkable to finance the Global Goals for Sustainable Development in hard currency, because the resulting currency risk ends up on the shoulders of those who can bear it the least. The willingness to resolve the currency risk challenge is growing. Transforming this willingness into action is the reason TCX exists.
The plan of action for the near future is based on the following three key activities:
– Market creation
– Market deepening
– Knowledge sharing
The success of TCX is built on the availability of patient, risk tolerant, and impact-seeking capital. As foreseen in the 2018 ICAAP, we have reached the limits of growth based on our current capital. We are therefore calling on the existing and new investors to support TCX in realizing its mission through additional capital injections. Simultaneously, TCX shall significantly increase its capital efficiency, by mobilizing the private sector and delivering more impact per dollar invested.
To open the paper containing TCX’s ambitions for the coming years, please click here.