THERE is a limit to the amount that each of us can spare for charity. Making loans, instead of gifts, to small businesses in the developing world means that lenders can use the same sum of money to help a number of individuals, families and communities over the years. Savvy internet users are turning to Kiva.org , an organisation promoted by the former US President Bill Clinton that allows people to lend to thousands of such businesses worldwide.

The website lists scores of entrepreneurs looking for contributions to “microloans” of up to $1,200 (£590). You can lend as little as $25 to each fund. The loans are repaid, without interest, over an agreed term, after which you can choose to take back your money or lend again. Once a loan becomes active, you can opt to receive e-mail updates on the progress of the business from Kiva’s partner organisations in the field.

Examples of the people benefiting from Kiva’s loans include Hamida Khidri, 39, one of Afghanistan’s many war widows, who is now paying back a $300 loan to stock her beauty salon in Kabul. Still seeking help is Harrison Maina Munge, 23, of Mombasa, Kenya, who has so far raised $125 of a $650 loan request. The full amount will buy trousers for his clothes business, rent a market stall and pay the municipal licence.

Loans are not guaranteed, but Kiva reports a default rate of only 0.3 per cent on $1.4 million in loans. Despite the insignificant level of risk, Fiona Ramsey, of Kiva, says that lenders should treat their loans like an investment. “Put in no more than you can afford to lose,” she says, “and diversify your portfolio by, say, lending $25 each to four people rather than one loan of $100.”

Levels of risk also hinge on the effectiveness of the field partner organisations that mediate between each loan applicant and Kiva. Basic details of these middlemen appear on the profile pages of each loan applicant. Included is a risk rating of up to five stars. High ratings indicate that a field partner has a proven record of securing repayment. Field partners are allowed to charge a “reasonable” interest to business owners to cover transaction costs.

Field partners are responsible for the written updates that lenders can hope to receive on the progress of a business. There is huge variation in the quality and frequency of these. If this personal link is important to you, click on to the field partner’s main page to check its “journaling performance” statistics. For a greater level of contact, visit your borrower in person. Ms Ramsey says to contact the field partner direct to request permission. It has never been turned down, but it is not automatic.

All the money you lend goes to the small business concerned. Kiva’s overheads are covered by general donations and by optional charges of a few pounds per loan. Payments can be made by card using PayPal. For more on the economics behind microfinance go to www.kiva.org/about/microfinance .