Social Merchant Bank ApproachSM
Through its Social Merchant Bank ApproachSM (SMBASM), S3IDF provides financing, technological know-how, and business training to enterprises and projects that supply pro-poor and pro-environment infrastructure and productive-use services. By working locally and providing bundled services, S3IDF not only addresses the need for infrastructure but does so in a way that leads to healthier and more self-reliant communities. S3IDF also empowers other institutions and groups to implement the SMBASM through its dissemination initiatives. S3IDF specifically designed the SMBASM to be widely applicable across technologies and geographies so that pro-poor and pro-environment infrastructure and productive-use services can be scaled more quickly and have larger community impacts. The SMBASM addresses the problems facing the poor by simultaneously overcoming their lack of access to financing, knowledge of technologies and/or business experience. It addresses this lack of access by using innovative co-financing mechanisms and on-the-ground support. Most importantly, S3IDF’s SMBASM leverages philanthropic and development capital to mobilize local private capital to finance or co-finance viable enterprises. As a result, entrepreneurs are able to receive financing for viable projects that are often non-bankable under “business as usual” practices. Combining this financial leverage with S3IDF’s business development, supply-chain assistance, and technology knowledge, enables the poor to gain access to basic services, employment, and asset-creation opportunities. These benefits often also help to improve standards of living and stimulate local economic development. The salient features of the SMBASM are:
Explicitly Pro-Poor: The investments S3IDF supports through its SMBASM must explicitly benefit the poor as customers, employees, and/or asset owners.
Financial Viability: The enterprises incubated by S3IDF operate in a financially sustainable manner, including the payment of loans, from implementation onwards.
Leverage: S3IDF catalyzes participation by local financial institutions in its enterprise investment projects through innovative financing mechanisms (e.g. debt, equity, partial guarantees, margin money financing). Every dollar that S3IDF invests in micro-, small- and medium enterprises typically leverages at least two dollars in capital injected by local entrepreneurs, banks, and, in some cases, by government subsidies and equipment suppliers.
Partnering and Linkage Approaches: S3IDF works extensively with technology providers/equipment suppliers, financial institutions, local nonprofits and other groups, including government agencies. Through these partnerships, S3IDF provides financing, technological know-how and capacity building assistance to small, pro-poor projects and enterprises.
Highly Replicable: The SMBASM is designed to be widely applicable geographically and to be widely adaptable across various financial and infrastructure conditions. The investment deals it prioritizes are ones that are highly replicable, requiring only minor modifications to adjust for location particulars.
Environmentally Responsible: S3IDF promotes technologies and supply-chain improvements that produce local public heath benefits and local and global environmental benefits, including carbon offsets.