Before you give all of your disposable income to that old guy walking around with poor children on late night infomercials, hold the phone. There are other ways to help impoverished people that don’t involve a 1-800 number.Though it’s easy to lose perspective living in the world’s richest nation, poverty is the story for much of the rest of the world. Many countries of the “third world” are beginning to show signs of development, but most of Earth’s inhabitants still enjoy a standard of living below that of the average settler in colonial America. An estimated 25,000 children die every day because of poverty, and over a billion people lack adequate access to water.The traditional response of developed countries has been to offer direct aid to poorer nations. Though some more nationalistic Americans believe we shouldn’t concern ourselves with aiding other countries, the U.S. government contributes nearly $30 billion per year in foreign aid. Those critics will be happy to know we donate a meager portion of our GDP relative to many other industrialized countries.Developing countries also bought loans from the World Bank — an organization accused of benefitting Western companies while putting borrowing countries in debt and then using that debt as leverage for political goals.The least controversial form of giving is through charities and nonprofit organizations. While the work of such organizations is certainly significant — $95.5 billion or 79 percent of American aid came from non-government sources in 2005 —  a new way to fight poverty through capitalistic methods is gaining popularity.It’s called “microfinancing.” The basic idea is to provide low-interest loans directly to poor individuals who otherwise would not have access to them — mostly because they have no assets or cash flow, and banks can’t profit from them.The strategy has been around for a while, but it has gained steam through the championing of poverty wonks like Muhammad Yunus and Jeffery Sachs. And technology has helped promote the cause — the Internet has created new opportunities to microfinance individuals in more direct and transparent ways.Novel Web sites like Kiva.org have emerged, fundamentally changing the financial game in poor countries. Kiva is unique because it allows individuals from wealthy countries with a few extra bucks to log-on and connect directly with “entrepreneurs” from poor countries seeking money. Motivated by charity more than profit, users are able to browse through different teams of entrepreneurs who share the responsibility of paying back the loan. Each team takes a group photo, states its goals and even receives a default risk rating.The loans actually get paid back. This gives microphilanthropists the ability to use the same money they initially loaned to help out other individuals — it’s hardly a handout. And instead of simply signing a check to a third party, loaners are more personally connected with their aid.The transaction costs, which made it impractical for a credit market, are eliminated because the microfinance system pairs individuals with disposable income directly with the individuals that need the cash. Through this system, the economic fabric of poor countries has fundamentally changed.As we have recently seen since the credit crunch in the U.S., available capital for investment is the life blood of an economy. The wheels of the economy come to a grinding halt without a viable credit market. Through microfinancing we can also see how economic opportunity can change societies. One of the interesting elements of microfinancing is the large number of women who receive the loans. It has been suggested microfinancing helps reduce population growth as individuals move away from subsistence farming — which is doubly effective in reducing the strain on resources. These programs also empower women in their communities, encouraging literacy and social influence.Microfinancing is clearly a powerful force. Giving money to poor people indirectly through government or nonprofit organization may be preferred by some, but it will be interesting to see how widely charitable individuals take up this new, hands-on, and highly capitalistic form of giving.Mark Macmurdo is a 22-year-old history and economics senior from Baton Rouge. Follow him on Twitter @TDR_mmacmurdo.–Contact Mark Macmurdo at [email protected]