2011 Banana Skins Report highlights declines in FX Risk

Feb 2011
Washington, DC, February, 02 2011 - The 2011 Banana Skins Report, conducted by the Center for the Study of Financial Inclusion (CSFI), is an annual industry-wide survey that highlights the main risks perceived by the microfinance industry.

he 2011 report was announced today, and showed a marked decline in Foreign Exchange Risk across industry practitioners, investors, and other stakeholders. The report went on to note the following trend as a potential explanation:

“Respondents said that MFIs were tapping more local deposits and receiving more of their foreign funding in local currency. Foreign exchange expertise was also growing, and hedging possibilities had improved. A respondent from East Africa said that ‘most MFIs prefer to borrow from local sources, and those that borrow from overseas engage in hedging arrangements with local banks.’ However, the importance of external funding to some MFIs means this could still be an area of risk particularly if, as respondents in particular markets noted, local funding sources are inadequate and hedging possibilities remain limited.”

MFX sees this as a clear sign that our mission to facilitate more local currency lending in the industry, as well as the education and technical assistance initiatives that we been working on are paying off! This is great news and very encouraging for the industry.

Source : MFX

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