Private Sector Finance

Local Currency Financing

Currency exposure that remains unhedged can potentially be detrimental to the interest of an infrastructure project or company, project beneficiaries, end-users, lenders, and sponsors in the event of a drastic movement in exchange rates. This was particularly evident following the Asian financial crisis in the late 1990’s.

ADB can play a vital role in selected developing member countries to ensure the sustainability of companies and/or projects by extending long-term local currency loans particularly to those that generate revenues only in local currency.

ADB's assistance in such projects or companies is intended to supplement the requirements of borrowers by providing additional risk-taking capacity in local currency, which commercial lenders are unable to provide. ADB will not compete with commercial sources nor substitute for them.

ADB takes a leadership role in the region in launching a local currency financing facility in the Philippines. This innovative solution may be replicated in other countries.

Read more about this ground breaking initiative.

• Market View: Ajay Sagar, Principal Structured Finance Specialist, Asian Development Bank discusses this in vol. 8 issue 6 April 2005 of Trade and Forfaiting Review magazine. [ PDF: 97.3kb | 1 page ]
• ADB 38th Annual Meeting Seminar: Financing the City - New Approaches to Local Currency Financing
• ADB launches first local currency swap for Manila* 13 January 2004, Inq7 Money (Philippines)

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** Posted with permission from Global Clearinghouse and World Economic Forum