MC is a metadata based database. It shows you your media organized by metadata (tags) and not by where it is stored. This frees you from being shackled by a particular directory structure, which can be deleterious when dealing with large collections that span many drives.
If you want to look at your media based on location, you have a couple of options:
1. Create a view based on location (Right Click in the Tree->Add Library View->Disk Location)
2. Use the "Explorer" feature, found under "Drives & Devices" in the tree.
...but the Smartlist is limited to other purposes except dealing with Folders.
Smartlists actually can deal with folders. You can create smartlists based on location, by using the rule "Filename (path) contains ..." Create as many as you want.
MC does not automagically create multiple smartlists by recursively traversing a directory tree and splitting the lists by folder.
So I will ask, why exactly do you want to create smartlists in this manner, for what purpose? What are you trying to achieve or do? Why do you think you need smartlists that correspond to these folders?
If we can understand your goal, we might be able to point you at a better solution.
Because users often ask for very strange or convoluted things, because they did not know there was a better way to do it. Sort of like asking how they can install an AC generator in their car to power an electric heating pad, because they don't realize the car has a heated seat feature.