The East African currencies have had a very tough six months. As we reported back in August, the Ugandan shilling had depreciated by almost 20 % to the euro, and in the middle of October the same thing happened to the Kenyan shilling when it hit a low of 146 shs to the euro (compared to an average of 118.52 shs the first six months of the year).
‘The slide of the East African shillings also affects MYC4 investors around the world. How? When a MYC4 loan is disbursed to an African entrepreneur, this is done in the local currency of the recipient country, rather than in Euro. MYC4 follows this procedure in order to ensure that the African borrower doesn’t experience fluctuations in how much he or she owes MYC4 in the local currency. […] While local currency disbursement seems reasonable from the perspective of the borrower, the flipside of the coin is that MYC4 investors carry the entire currency risk.’ To know more about this, read As the Shillings Slide… To see how the currency fluctuations have affected the overall MYC4 loan portfolio, go to Portfolio Performance 3rd Quarter 2011.
Things have recently started to improve though. The graphs below show the development of the Kenyan shilling and the Ugandan shilling since June this year. Below is also a video from NTV Kenya which covers the topic of the shillings’ recovery.