Our research

Local currency as a foundation for sustainable development finance

The currency in which development is financed matters. Governments, public development banks, and businesses in low- and middle-income countries often receive finance in foreign currency while generating revenues in local currency. This mismatch can expose borrowers to exchange rate risk, increase debt servicing costs, and undermine otherwise viable investments.

These risks are especially significant for long-term development and climate projects, whose revenues are typically generated domestically. Yet local currency financing remains limited from both international and domestic resources, while conventional hedging instruments may be unavailable, prohibitively expensive, or unsuitable for the maturities required.

Our research agenda

We study development finance through the lens of currency. Our research asks how the currency denomination of finance, the allocation of exchange rate and related financial risks, and the design of legal and institutional frameworks shape countries’ capacity to finance sustainable development.

Our work encompasses barriers to local currency lending, currency risk management, hedging and risk-sharing mechanisms, multilateral and public development banks, sovereign debt, climate and infrastructure finance, domestic financial system development, and the international monetary and financial architecture.

Currency is our central organising theme, but our research extends to the wider structures that determine how development is financed, on what terms, and by whom. We are particularly interested in how financial risks are distributed between borrowers, development finance institutions, governments, donors, and private investors, and whether that distribution supports or undermines development objectives.

Our approach

Combining expertise in economics, law, finance, and political economy, we produce rigorous research and policy solutions aimed at expanding access to sustainable and affordable local currency finance.

Our work brings together quantitative and macrofinancial analysis, legal and regulatory research, institutional analysis, and direct engagement with policymakers and practitioners. We examine both the structural features of the international financial system and the practical constraints faced by individual institutions and countries.

This allows us to work across different levels of the development finance system. At the international level, we investigate reforms to multilateral development banks, risk management frameworks, and the wider financial architecture. At the national and institutional levels, we examine the legal, regulatory, and financial conditions required to expand local currency lending in ways that support sustainable and just structural transformation.

From research to policy solutions

Our research is designed to inform practice. We do not only identify barriers to local currency finance; we also develop proposals for changing how currency risk is priced, managed, and shared, and for expanding the institutional capacity to provide local currency finance.

This includes work on more flexible approaches to risk management, the expansion of affordable hedging options, the use of guarantees and other risk-sharing instruments, and the development of legal and regulatory frameworks that support onshore local currency operations.

Our approach also recognises that no single instrument will work in every context. Effective solutions must respond to local financial conditions, institutional mandates, regulatory frameworks, and the needs of borrowers. Our proposals combine financial modelling, legal and institutional analysis, and stakeholder engagement to develop solutions tailored to the needs and operating contexts of particular institutions and countries, while remaining adaptable to other settings.

Our ambition

Our aim is to contribute to a development finance system in which countries and institutions can finance long-term development in their own currencies.

By bringing together rigorous interdisciplinary academic research and policy engagement, we seek to support reforms and practical solutions that make development finance more affordable, resilient, and consistent with sustainable development.