Now MFIs can choose “currency risk protection” for their new loans. If this option is selected lenders will have to cover any losses that arise from a devaluation of the local currency exceeding 20% (for the part that is over the 20%).
On listed loans at Kiva there will be a new information status on the “about the Loan” Section under “Currency Exchange Loss”. The status will either be:
- “Covered”: Meaning the MFI covers any losses (like it has been in the past)
- “Possible”: The MFI has opted for the new rule – the lender covers currency losses above 20%
I browsed some new loan listings today – most are still offered under the “covered” rule, one example of a loan under the new “possible” rule is this Tajikistan loan.Here is a Kiva video on the merits of currency protection.
I do wonder if it will be sustainable to burden part of the currency risk on the lender while at the same time he gets no interest and takes the default risk.