TCX Concessional and Collateral Facility (TCXPCF)

active

The Currency Exchange Fund N.V. (TCX), Amsterdam, has been an operating provider of currency hedging since 2008. The overarching development policy objective of the measure is to improve borrowers' access to local currency loans and to contribute to the development of local currency and capital markets. Borrowers in emerging countries with investments in local currency often have to choose between two alternatives for long-term financing (1) Either they finance long-term assets in local currency with short-term liabilities in local currency, which therefore poses a risk due to timing mismatch. (2) Or they finance these assets with long-term, hard currency liabilities from international investors, thus running the risk of currency imbalance. In order to help microfinance institutions, banks and public infrastructure that provide local financing in developing countries to reduce these undesirable market risks, TCX offers hedging products for local currency loans in countries or currencies that are on the list of recipients of official development assistance of the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD; or its Development Assistance Committee (DAC). TCX thus enables financing that is desired in terms of development policy and its underlying business models. The funds for this project come from the European Union's External Investment Plan (EIP). This envisages the establishment of the European Fund for Sustainable Development (EFSD) as its first pillar, alongside technical assistance as its second pillar and the improvement of the investment climate and the general political framework in the partner countries as its third pillar. The EFSD aims to support investments, primarily in Africa and the European Neighbourhood, to contribute to the achievement of the Sustainable Development Goals set out in the United Nations (UN) 2030 Agenda for Sustainable Development (hereinafter Agenda 2030), in particular the eradication of poverty, and to the implementation of the commitments under the recently revised European Neighbourhood Policy.