AfDB injects $25m equity investment into TCX for Africa
The African Development Bank (AfDB) has approved a $25m equity investment in The Currency Exchange Fund (TCX) to boost access to local currency financing and shield African borrowers from volatile foreign exchange risks.
In a statement on Thursday, AfDB confirmed that its Board of Directors endorsed the investment, positioning the bank as a key partner in TCX’s mission to expand currency hedging solutions across the continent.
TCX, based in Amsterdam, is a global leader in offering long-term local currency hedging instruments for emerging and frontier markets. It specialises in protecting borrowers from currency risk through derivative products such as cross-currency swaps and FX forwards, particularly in currencies that are either underserved or completely overlooked by commercial financial institutions.
According to AfDB, the equity injection will strengthen TCX’s capital base, increase its risk-bearing capacity, and widen its ability to provide hedging instruments in illiquid and less liquid African currencies. The bank explained that currency risk remains a major barrier for businesses and governments in Africa, often leading to debt distress when loans denominated in foreign currencies clash with revenues earned in local currencies.
“The transaction will help mitigate the foreign exchange risks faced by borrowers in Africa, particularly those operating in fragile states and underserved markets,” the statement noted. “The Bank’s investment will crowd in additional development finance institutions (DFIs) and private investors, reinforce Africa’s integration into global capital markets, and support sustainable growth by reducing the mismatch between the currency of debt and revenue for local borrowers.”
Director of the Financial Sector Development Department at AfDB, Ahmed Attout, described the move as a milestone in the bank’s efforts to deepen African capital markets.
“This investment in TCX marks an important milestone in the Bank’s effort to deepen African capital markets and address the root causes of debt distress,” Attout said. “The Bank’s support to TCX will unlock local currency financing for MSMEs, infrastructure, and many sectors across Africa. The transaction forms part of the Bank’s broader objective to promote access to adequate financing through innovative alternative solutions.”
The investment builds on AfDB’s prior participation in TCX and reflects the bank’s sustained confidence in the fund’s model. Since its establishment in 2007, TCX has hedged more than $17bn in notional amounts globally, including over $4bn across 31 African countries. Around 18 per cent of its outstanding portfolio is focused on fragile and low-income markets, highlighting its importance in supporting high-risk economies.
The AfDB said the partnership will support increased hedging volumes in sectors such as infrastructure, public development banks, debt management offices, energy access, microfinance, and SME development. By providing more predictable financing, TCX helps businesses and governments manage risks and attract long-term capital.
The fund’s role is particularly crucial in Africa, where volatile exchange rates and limited access to hedging tools have discouraged international and domestic investment. With AfDB’s backing, TCX will be better positioned to offer stability and reduce uncertainty for both public and private borrowers.
TCX Chief Executive Officer, Ruurd Brouwer, welcomed AfDB as a shareholder, emphasising the significance of the new partnership.
“We are thrilled to welcome African Development Bank Group to TCX’s capital base, joining fellow development finance institutions, impact investors and governments that support our local currency hedging solution,” Brouwer said. “It marks the start of a close partnership in protecting AfDB’s public and private sector borrowers from currency risk and promoting the development of African capital markets. We very much look forward to increasing our joint impact on the continent.”
This latest move aligns with the AfDB’s 10-year strategy for 2024–2033, which prioritises financial innovation and market deepening. It complements the bank’s wider capital markets initiatives, including support for local currency bond issuance, provision of partial credit guarantees, and expansion of private sector local currency lending.
Analysts say the AfDB-TCX partnership will play a key role in reducing Africa’s dependence on foreign-denominated loans, protecting vulnerable economies from exchange rate shocks, and fostering sustainable growth. By helping borrowers align debt obligations with their revenue streams, the initiative is expected to strengthen resilience across the continent’s financial systems.