The Social Microenterprise Initiative (SMI) is our flagship project. It was created by ABSF founder Arthur B. Schultz to support fledgling small business entrepreneurs  in the developing world with capital equipment loans using an innovative pay-it-forward model to increase productivity and business growth, provide additional employment opportunities, and to distribute free goods and services to thousands of disadvantaged recipients.

Since the mid-1990’s, the Arthur B. Schultz Foundation has provided over $1 million in these unique pay-it-forward small business loans to developing world entrepreneurs. We call our model the Social Microenterprise Initiative, or SMI for short.

SMI is different from traditional microcredit programs:

• SMI loans are always interest-free.
• SMI loans are repaid through donations of in-kind products or services to the poorest people in SMI businesses’ communities—never in cash from profits.
• SMI loans are strictly for machinery and equipment, not for consumable, marketing, or operating expenses.
• SMI loans target a different business demographic--instead of sole-proprietor, household-based ventures, SMI targets the “missing middle”--small businesses, typically with 10 employees or less, that are too big for microfinance institutions (MFI’s), but too small to secure commercial bank capital.
• SMI loans strive to create new, permanent jobs associated with expanded production capacity.
• SMI promotes a culture of business-sponsored community charity.

For example, a bakery that purchases a new oven through an SMI loan might repay the value of that oven in fresh bread given to orphanages or refugee camps. Or a medical clinic receiving a loan for new diagnostic equipment might repay the value of the equipment in free exams and treatment for poor families in their community. SMI loans currently run from $1,000 up to $10,000 USD, are always interest-free, and are never repaid in cash—only in the documented retail value of donated charitable products and services.

As the original vision of the founder of the Arthur B. Schultz Foundation (ABSF), SMI evolved from a grant program for post-Soviet Russia in the mid-1990’s (then called the Schultz Fellowship Fund, administered in Russia by the Center for Citizen Initiatives). In 2005, SMI was implemented in Vietnam in partnership with the Vietnam National University-Hanoi Center for Economic Development Studies (CEDS). In 2007, SMI began in Palestine in partnership with the Birzeit University Center for Continuing Education (CCE). SMI will expand into Kenya in March 2009, and likely, Latin America in 2010.

Both CEDS and CCE were selected as on-the-ground partners to administer the SMI loans, which includes field screening and selection of qualified applicants, price negotiations with equipment suppliers and accounting of all SMI funding, verification of business reporting and charitable loan payback activities, and quantitative and qualitative reporting to ABSF and partner donors. Local NGO partner organizations such as these two bring absolutely critical experience in local small business consulting and entrepreneurial/vocational training to the administration of SMI programs, and provide invaluable counsel to the small business entrepreneurs targeted by SMI. They are the engines that drive the SMI program forward.

SMI is designed to have an impact on both the business and social sectors of selected communities in developing economies. The ultimate objectives of SMI are 1) to enhance business production capabilities; 2) improve business employment and growth opportunities, and 3) to foster a lasting sense of social responsibility and community charity in participating businesses.

The primary mission of the Arthur B. Schultz Foundation today is expanding SMI programs around the world, and spreading awareness of the SMI concept in the philanthropic community. We are actively looking for funding partners us to help us grow small businesses, create jobs, and provide charitable services to the poor in communities in which these businesses operate. The more partners we bring onboard, the more businesses and communities we can assist, and the more countries SMI can eventually reach.

To further learn about SMI implementation in our three main countries, please visit these links to: Vietnam, Palestine and Kenya. In 2008 we completed an SMI Evaluation Report (available for download) to look closely at our challenges and successes and to help us move forward with recommendations provided by our in-country NGO partners, SMI recipients and independent evaluator.

Download 2008 SMI Evaluation Report (1MB)

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