In 2003 Muhammad Yunus and Grameen Bank were awarded the Nobel Peace Prize for their work with establishing microfinance in Bangladesh. Microfinance (in the Grameen case, to the best of my understanding, small loans to groups of women who were jointly responsible for paying back the loan) basically proved that one can lend money to poor people, who historically weren't considered credit-worthy, and get your money back.
One of the more interesting Internet operations of recent time is Kiva, a non-profit based in San Fransisco, who brings together indivdual lenders from all over the world with poor people seeking microloans.
(I find the ability to assemble a group of people who want to change the world (in some sense), and have them contribute to the cause as one of the socially more interesting things happening online at the moment.)
Kiva works with a number of local partners who find entrepreneurs seeking loans and manage the contact with the entrepreneurs. The entrepreneurs are presented at Kiva.org and as a lender one chooses which entrepreneurs to lend to.
The smallest amount one can lend is $25. There is, of course, no guarantee that a loan will be paid back. In addition there is no interest paid on the loan, so lending is a combination of charity and lending as one as the lender is not compensated for the risk of loss nor the cost of capital.
Personally I've made a few loans, and if/as they are paid back I'll likely roll them into new loans. To manage risk (even though it is not big issue, I would prefer if the loans are paid back) I use the learnings from Grameeen and have lent to groups of women. It'll be interesting to follow the development over the next 9 to 13 months as the loans are re-paid.
When making a loan Kiva asks for a donation to cover its operational costs (they don't take a cut from the loan). My understanding is that Kiva makes money from the donations from lenders, donations from foundations and likely also earns some interest on loans that have been partially paid back, but haven't yet been distributed to lenders.
If this sounds interesting, check out Kiva. If you sign-up as a Kiva member as a result of this blog post, feel free to add my e-mail firstname.lastname@example.org in the Referred by a friend? field on the sign-up page. (Kiva has some nice social design encouraging word-of-mouth where referring friends is a good thing.)
(On a side-note: I've jokingly said that I get what Umair at bubblegeneration writes roughly two years after he writes it, and truth to be told he called Kiva the next big thing back in October 2005 when the rest of us were still going ga-ga over eBay's acquisition of Skype.)
Update Dec 20th 2008: Kiva after 9 months and Kiva follow-up, month 1