Author(s):
Brian Cox
Sonia Mukhi

Brian Cox, President, MFX Solutions, USA Sonia Mukhi, Senior Analyst, MFX Solutions, USA Among its other lessons, the financial crisis revealed the extent to which MFIs are at risk when they borrow in hard currency to fund lending in local markets. The paper will highlight the latest data on currency risk in microfinance and describe best practices for managing currency risk by both international lenders and MFIs. It will describe new ways that investors are using currency derivatives and diversification strategies to shift their lending to local currency as well as new analytical tools that help MFIs quantify risk and plan their borrowing.