With a little help ... microcredit benefits businesses, bank accounts and the environment, too. (Money Matters).

Socially responsible investing has traditionally meant keeping your money away from negative investments. But what if you lent part of your nest-egg to a poor person, and they used it to start a business that enabled them to escape poverty, create long-term savings and generate interest for you, the investor? And what if the conditions of the loan encouraged environmental sustainability, a reduction in population growth and improved health practices?

If this scenario sounds like pure fantasy, then you're probably not familiar with "microcredit," the practice of extending small loans to people in poverty so that they can start businesses and develop savings. At a 1997 Microcredit Summit held in Washington, D.C., First Lady Hillary Clinton cited microcredit as "an invaluable tool in al leviating poverty, promoting self-sufficiency and stimulating economic activity in some of the world's most destitute and disadvantaged communities."

Began in Bangladesh

The Grameen Bank in Bangladesh was the world first microlending institution, and it has succeeded by turning traditional lending practices upside-down. Instead of providing only large loans to men with collateral, Grameen seeks out the country's poorest people (usually women) and issues small loans that give them the means to grow crops, make crafts or start other businesses that can eventually sustain them.

After 20 years of microlending, Grameen Bank has not only helped nearly half of its borrowers get above the poverty line, but its default rate is lower than that of most traditional banks. Spurred on by its success, hundreds of microlending institutions have emerged to help millions of poor people in 43 countries find the means to feed their families, pull themselves out of poverty and build financial security. And while environmental improvements may incidentally accompany poverty alleviation, many institutions actively encourage environmental stewardship.

For instance, Grameen Bank borrowers pledge to keep their families small. And the Environmental Enterprises Assistance Fund (EEAF) invests in Third World entrepreneurs who have plans for businesses that will "green" their communities.

New in America

Nathaniel Goldberg of the Washington, D.C.-based nonprofit organization Microcredit Summit Campaign says that microcredit has only recently become available as an option for individual investors. "If people simply want to make a tax-deductible donation, they can give to Grameen Foundation USA," says Goldberg. "But for those who want to use microcredit as a safe investment, Calvert Social Funds offers some great new programs."

According to Calvert Development Officer Tim Freundlich, the firm offers two parallel pathways for investing in microcredit. "Investors who don't want to sacrifice a high rate of return can invest in a World Values International Equity Fund within the Calvert Group of socially screened mutual funds," says Freundlich. World Values invests a small percentage of its capital in microlending institutions like Grameen Bank and EEAF, and it offers a market rate of return.

"If you would rather see your entire investment go toward microcredit," he says, "you can purchase a Community Investment Note through our nonprofit arm, the Calvert Foundation. Holders of a Community Investment Note choose a fixed term, and they also choose their own interest rate, between one and four percent, depending on how charitable they wish to be."

Of course, mutual funds and investment notes aren't the only ways to put your savings to good use through microcredit. According to Green Money Journal founder Cliff Feigenbaum, "There may even be a local community bank where you can open checking, savings, money-market accounts and IRAs that use your savings to revitalize poor neighborhoods or invest in local environment-friendly businesses."

In Washington State, South Shore Bank has teamed up with Oregon-based Ecotrust to create Shorebank Pacific, which invests in local businesses that work to protect and enhance the state's natural resources. One Shorebank Pacific-supported business, The Joinery, makes furniture from sustainably harvested wood and used a loan to buy and renovate living quarters for its employees. Other beneficiaries have included a water filtration company, an environmentally friendly dry cleaner and a fish farm.

Feigenbaum says that even if there isn't a community bank or credit union in your neighborhood, you can still do your banking at one by using ATMs. A complete list of community banking resources is available through Green Money Journal, [phone], www.greenmoney.com.

DAMON FRANZ is an editorial intern at E.