Microfinance has been gaining popularity with investors as both a charitable cause and a smart alternative investment. A new fund from Citigroup Inc.–the Citi Microfinance Donor Fund–has created yet another way for philanthropists to meet up with poor entrepreneurs around the globe. In late June, Citi launched a charitable fund where individual investors and organizations can make donations of at least $50,000 to microfinance institutions. These financial institutions will then offer loans and other services to entrepreneurs in developing countries who don’t have access to banks.

The fund opened June 30, 2007, for irrevocable contributions of at least $50,000, and will remain open for 11 months. Citigroup will begin making grants to microfinance institutions shortly after that, according to a Wall Street Journal article. Donors will receive regular updates on the projects they are funding, as well as independent analytical reports from an outside firm, hired by Citigroup. The bank plans to allocate the money it collects within two years of the fund closing.

Donors will not be able to decide where their contribution goes. Rather, an advisory committee composed of representatives from Citigroup and microfinance experts will accept proposals from microfinance institutions and decide which ones will receive the money. Grant recommendations will be approved by the board of directors of Citi Gift, Inc., a nonprofit organization that oversees CitiGroup’s donor-advised funds. The money–in amounts no larger than $500,000–will then be granted to projects in five areas: technology, energy/environment, banking services in rural areas, life cycle needs, and the expansion of microfinance capabilities.

The new fund will give private bankers and advisors at the firm’s Smith Barney brokerage division another reason to discuss clients’ philanthropic interests. Citigroup plans to introduce other special interest funds, depending on how this microfinance fund plays out.