AfDB invests $25m in TCX to boost local currency financing in Africa

The African Development Bank (AfDB) has approved a $25 million equity investment in The Currency Exchange Fund (TCX) to expand access to local currency financing and reduce foreign exchange risks for borrowers across Africa.

The Abidjan-based lender announced the approval on Thursday, saying the investment would strengthen TCX’s capital base, enhance its risk-bearing capacity, and expand its ability to offer hedging instruments in illiquid and less liquid currencies on the continent.

According to the Bank, the move is aimed at addressing foreign exchange risks faced by borrowers, particularly in fragile states and underserved markets where conventional hedging mechanisms are either underdeveloped or unavailable.

“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,” said Ahmed Attout, Director of the Financial Sector Development Department at AfDB.

He noted that the facility would help unlock local currency financing for micro, small and medium enterprises (MSMEs), infrastructure projects and other critical sectors, adding that the initiative is part of the Bank’s broader agenda to promote access to adequate financing through innovative solutions.

Since inception, TCX has hedged more than $17 billion in notional amounts globally, including $4 billion across 31 African countries. Around 18 per cent of its current outstanding portfolio is in fragile and low-income countries.

Ruurd Brouwer, TCX Chief Executive Officer, welcomed AfDB’s participation, saying it would strengthen the fund’s ability to shield borrowers from currency risks while supporting the development of African capital markets.

“We are thrilled to welcome the African Development Bank Group to TCX’s capital base,” 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.”

The AfDB said the investment complements its Ten-Year Strategy 2024–2033, which prioritises resilient capital markets, support for local currency bond issuance, credit guarantees and private sector local currency lending.

The Bank added that the transaction is expected to catalyse additional investment from other development finance institutions and private investors, reinforcing Africa’s integration into global capital markets while promoting inclusive and sustainable growth.