Making small business loans to the world’s poor is now as easy as buying an iPod on eBay. The auction giant has launched MicroPlace, a for-profit online service that allows mom-and-pop investors to provide low-interest “microfinance” in developing countries while earning interest off the loans.

Small, individual loans provide the cash for budding entrepreneurs to do things like buy a cow to sell milk or a fruit squeezer to open a juice stand. MicroPlace investors can loan as little as $100 with interest rates ranging from 1% to 4%. “All it takes is a small amount of capital to lift people out of poverty,” says MicroPlace founder Tracey Pettengil Turner.

MicroPlace is the first microfinance site that permits ordinary investors to profit from their loans. By acting as a broker between investors and microfinance institutions, it potentially lets all parties make money – from the working poor to the individual lenders. MicroPlace is similar to non-profit site Kiva.org. But while Kiva allows people to loan money online to specific individuals, it does not pay interest on the microloans.

The idea of profiting from the poor makes some critics uneasy, and they say it may be better to donate a check to established microfinance groups like Accion International or Finca International. “It’s an exciting model in that you’re connecting people and making a direct difference,” says Jonathan Morduch, a professor of public policy at NYU who co-authored a book on microfinance economy. “But over the long haul it hasn’t yet proved itself as an established model where you write a check to an institution or network. I’m willing to trust an expert to pick a field and figure out how to best use the money. I’m less confident that I can make the best choice sitting in my home office.”

MicroPlace says the interest payments are an incentive for people to make a little money while also helping to cure global poverty. “This isn’t the same as getting your money back from the stock market,” notes Morduch. “Maybe it’s better if the extra $15 you make on a return stays with the institution if it means it can actually do more for poor people.”

The MicroPlace works a lot like investing in a mutual fund. The site, which had been in development when eBay (EBAY) acquired MicroPlace in June 2006, lets individual investors pick a fund from a specific region or country. The funds are managed by the non-profit investor Calvert Foundation and Dutch microfinancier Oikocredit, which reinvests the money with hundreds of local lenders that make loans to the impoverished. MicroPlace investors can make a loan through a bank or PayPal, which processes payments for free. While there’s no guarantee that investors will make back their principal, let alone interest, Turner says microfinance receipients have a 97% repayment rate.

Much like eBay’s marketplace, MicroPlace earns revenue from listing fees that it charges the fund issuer. An eBay spokesperson says if MicroPlace becomes profitable, it’ll use future revenues to fund other socially-minded initiatives within the company.

EBay’s interest in microfinance was established by company founder Pierre Omidyar. A proponent of helping the poor create sustainable economies, he created his foundation, Omidyar Network in 2004, and helped advise MicroPlace in its early stages. Former eBay executive Matt Bannick, who spearheaded the purchase of MicroPlace, left the company in March to run Omidyar Network. Says Turner, “Matt felt it was a good fit for eBay to leverage its expertise in building marketplaces with small business owners, payment processing, and connecting people with one another to change world ideas.”

Turner hopes MicroPlace’s approach will help grow the industry from 100 million investors to 1 billion worldwide and subsequently, reach billions of the poor. The idea for the site struck her when she worked for microfinance pioneer Grameen Foundation in 1998.

Turner went to visit a woman in an extremely poor Bangladesh village. The woman had received a modest loan that allowed her to buy a handloom to weave fabric. She sold enough fabric to repay the loan, send her kids to school and earn a profit. A photo of her now hangs in Turner’s living room.

Says Turner, “I keep that photo there to remind me how everyday people like you and me can reach out and help people like Mina Choudhary in a sustainable way.”