Microfinance institutions face significant Asset-Liability Management (ALM) challenges, particularly when funding their local microloan portfolios through international development loans.

MFI borrows funds in US Dollars -> Convers capital into Local Peso Tokens -> Ingests high exchange rate devaluations -> Credit defaults spike

If an MFI borrows capital denominated in a foreign currency (such as the US Dollar) but lends to local micro-enterprises in domestic currency, a sudden local currency depreciation can inflate its foreign debt burden while its revenues remain flat. To insulate themselves from this risk, mature MFIs use local currency hedging tools, secure domestic retail deposit licenses, or partner with local commercial banks to build resilient funding structures.