In emerging markets, currency fluctuations can be large. It can be very expensive and perhaps impossible in practice to uncover this risk, often because the local currency market does not function well. NMI may still, in some cases, offer financing in local currency thanks to a hedging scheme, which is funded by the Foreign Ministry. This currency hedging scheme helps mitigate the risk of the local foreign exchange market not working as it should.
When a microfinance institution can finance in local currencies, it has a far more predictable funding costs. It makes it easier for institutions to plan activities and achieve their financial and social goals. For investors in NMI this scheme entails that the risk of investing in countries with large currency fluctuations can be dampened somewhat.