As a charity that raises funds in once currency (pound sterling) but spends them mostly in a foreign currency (Kenya shillings) we are exposed to and challenged by the volatility in the foreign exchange markets, which can make the cost of our projects in sterling terms unpredictable and also affect the purchasing power of the funds that we raise.
Since February 2015 we have employed the practice of currency hedging to help provide greater certainty of the costs of our work and manage the risks of volatility in the currency markets, which has been particularly evident over the last year or so as a result of the Brexit referendum in the United Kingdom.
As a result of this strategy and of prudent and careful planning and decision-making we have also been able to raise the purchasing power of our funds. We are currently sending funds to Kenya at a rate of between 145 and 152, which is up to 15% more than the current market rate*. In the financial year 2016/17 we saved £25,000 through our use of currency hedging and since February 2015 we have saved a net amount of £15,000 on more than £350,000 worth of currency transactions – enough to build two classrooms or fund our feeding programme for 60 days.
Furthermore, we have eliminated the transaction costs of our currency trades through our use of a foreign exchange provider rather than our bank to send these funds overseas. This represents an additional saving of more than £1,000 in administration and transaction charges over the last 2 years.
*132.34 as at 26th April 2017 (www.xe.com)