Read more about Cardano Development.
TCX-FMO
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Das Währungsrisiko per Fonds absichern
Börsen-Zeitung, 8 March 2011
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The Currency Exchange Fund: innovation means constant adaptation
VBA, winter 2010
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Project Coin-Re
Community Cat-Risk Insurance
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Cardano Development
Cardano Development’s primary aim is to bring high-impact financial risk management innovations to the frontier markets. The focus is to create new, scalable, practical solutions to mitigate extreme risks for end-users in developing countries, such as currency risk, catastrophic risk (cat risk) or commodity price risks. The purpose is to give end-users the instruments to manage their main risks, thereby reducing the hurdles to invest and build up their core business and to promote stable and sustainable economic development.
The best example to what we mean with this statement is The Currency Exchange Fund N.V. (TCX), www.tcxfund.com. Based on the proven principles of a Mutual, it introduces the financial instruments required for Development Finance Institutions (DFI’s) to deliver local currency financing to their clients, for example microfinance institutions. The local currency financing removes the systemic impact of a strongly depreciating currency affecting the whole economy in a country. Cardano Development is the owner of TCX Investment Management Company (TIM), the Investment Manager of TCX Fund.
Cardano Development, TIM and other partners are also working on various other interesting initiatives. Two prominent projects are a pilot case for a broker in drought insurance policies for agricultural communities in Sub-Sahara African countries and participation in the development of a Pan-African commodities and FX derivatives exchange.
The community-insurance project aims to make higher yielding cash-crop farming viable, notably in Sub-Sahara Africa, by delivering an instrument to manage the cat risk of a disastrous drought period. Cardano Development is striving to set up a brokerage activity to connect strategic partners, like reinsurance companies, weather (satellite) data providers and agriculture specialists to design cat risk protection which can be distributed via the microfinance institutions to agricultural communities. The primary purpose of the initiative is to reduce counterparty risk to the level required to make microfinance available to these farmers, so that hard-needed investment brings these small agricultural businesses to the next level of sustainability. Click here for more information.
The access to commodity and FX risk mitigation instruments in Sub-Sahara Africa is predominantly provided through international banks that transfer capabilities of international markets (e.g. CME-traded products) to their domestic clients at a high cost. Access of local banks, the broader corporate communities and SME / micro-entrepreneurs to these products is very limited and costly. Counterparty risks and preference for high volume clients are barriers to access in derivatives in frontier markets. Separately, the local markets offer little by way of institutional infrastructure to enable the trading of these products. The legal and documentation issues, the operational environment and the lack of institutionalised credit management prohibit the creation of an (Over-The-Counter) derivatives market. We are involved in the initiative to develop a Pan-African exchange and clearing house to offer commodity and FX products to all market participants, which would remediate a large number of these issues and should kick start the use of financial instruments by end users to manage their risk-return profile efficiently.