Microfinance is the provision of financial services, usually in very small amounts, to poor people. The key idea is that these services are market-based and without subsidy. The first successful stories of microfinance I heard about centered on the work of the Grameen Bank in Bangladesh. Success in microfinance is generally measured both in terms of helping the population served and by usual business metrics of revenue and profit. Microfinance has indeed been successful as measured by helping the very poor start businesses that lift them out of poverty, provide needed services to their locales, as well as paying back the financiers profitably so they are thus able to repeat the cycle.
Ideas of microfinance have migrated back to the developed world to help underserved populations, including in the USA. Not every example is a success on either dimension, and each circumstance needs the right approach in order to work.
I recently saw a couple of new derivatives of these ideas. One is The Acumen Fund which calls itself a global non-profit venture fund. Another is Kiva that allows philanthropic and microfinance minded people in the rich world to provide loans directly to entrepreneurs in the poor world. Kiva's website says that
Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you've sponsored. As loans are repaid, you get your loan money back.Both of these are microfinance 2.0 if ever such a label was warranted.