Sarona Risk Capital Fund and Sarona Risk Capital Fund 1 LP

In 1953 MEDA was established as a venture capital fund to invest in businesses operated by and for the benefit of the poor. The capital provided by MEDA members was to be repaid to MEDA for use in other similar projects. MEDA’s first investment was in the Sarona dairy in Paraguay. That investment was repaid in full in 1972.

There is a key stage in the life of a business when it needs high-risk capital to give it the chance to prove itself, attract other capital, and begin to move to profitability. The Sarona Risk Capital Fund provides that need. Sarona has already contributed to the success of many business, funds, and microfinance institutions (MFIs).

Sarona semi-annual report 2009 | 2008 | 2007 in PDF format.

Sarona annual report 2009 | 2008 in PDF format.

In July 2007, MEDA Investments Inc launched a second Sarona fund – the privately owned Sarona Risk Capital Fund I LP, a sister fund to MEDA’s Sarona Risk Capital Fund. The offering of limited partnership units in this private LP closed Dec. 31 with a total of $1.5 million in units sold to investors. MEDA’s fund has approx $7.5 million in assets.  Both of the Sarona funds – the private LP and MEDA’s fund – will invest in the same companies on the same terms. Henceforth, when referring to Sarona, we generally refer to both funds.

SRCF and SRCF 1 LP Investments

Producing ethanol in Paraguay: MEDA Paraguay and local Mennonite investors have put together a business plan to start ethanol production using a combination of sugar cane, corn and maize from a new plant starting in the first quarter of 2009. MEDA members and Sarona will be investing US$600,000 in equity in two tranches in 2008 to pay for the start-up phase of this operation. Land for the plant and production of sugar cane, corn and maize has already been purchased.

Debt financing to Haiti’s largest microfinance institution: Sarona has lent US$300,000 to Sevis Finansye Fonkoze (SFF) , Haiti’s largest microfinance operation. The debt financing is short term and expected to be fully repaid in 24 months. SFF serves 45,000 borrowers and 115,000 savers (May 2007 figures).  There is also an option on convertibility of debt into equity between the 12th and 24th month of the debt financing. 

Additional debt financing made available to Argentina Microfinance S.A. (AMSA): AMSA, an Argentinean microfinance institution, was off to a rough start due mostly to a lack of debt and equity financing to grow in the Argentinean marketplace. In November, MEDA was involved in a three-party financing package involving GMG (owner of AMSA), ResponsAbility Fund and MEDA to help AMSA access the necessary financing required to break even, a precursor for additional financing.  MEDA and MEDA members provided US$500,000 in financing, split between GMG shares in Switzerland (about 15 per cent of the amount) and AMSA preferred shares (the remaining 85 per cent). The investors had the option of receiving interest on the preferred shares in USD at 12 per cent per annum or in local Argentinean pesos at 20 per cent. The preferred shares have an imbedded put option that can be exercised between the 48th and 49th month following the disbursement of the funds. 

MiCrédito (Nicaragua): MiCrédito was started in Nicaragua in September 2004. Operations began with branches in Managua and Teustepe; the Leon branch was added in 2006. Long-term plans are to open branches throughout the country. MiCrédito has grown steadily since inception and now has a portfolio of approximately $2 million. It has made over 3,000 loans averaging $990 and currently has 2,000 clients. Of these loans, 60% are to women clients and 38% to rural clients. To date, over 98% of all loan funds have been fully repaid. MiCrédito is profitable and is projected to remain so in the future, ensuring its long term viability.

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