Bhagyamma Vadla started a dairy with $674. She is the kind of entrepreneur eBay founder Pierre Omidyar is hoping to fund.

Omidyar, who started eBay 10 years ago, will announce Friday that he is donating $100 million for a new Tufts University program to generate millions of tiny loans, some as small as $40, to finance entrepreneurs trying to escape poverty in India, Bangladesh and other poor countries.

The gift is a big endorsement of social entrepreneurship — a field of growing interest for the new generation of technology entrepreneurs. The shift could recast traditional philanthropy dominated by non-profits such as the Ford Foundation built on Old Economy wealth. (Related item: Entrepreneurs drive philanthropy)

By Matt Stroshane, Bloomberg News Pierre Omidyar, founder and chairman of eBay, is donating $100 million to Tufts University.

The new entrepreneurs, impatient to resolve global problems more quickly, are applying the very business models that made them rich at eBay, Microsoft, Google and America Online to battle the most vexing issues, from poverty to childhood disease. "We ought to be looking at business as a force for good," Omidyar said in an interview.

Other tech entrepreneurs are making similar moves. Microsoft's Bill Gates just announced $258 million to help drug giant GlaxoSmithKline and others defeat malaria, a disease killing 2,000 African children daily.

Google's founders last month said their planned $1 billion in philanthropy would include backing entrepreneurs in places such as western Africa. On a smaller scale, America Online co-founder Steve Case in August said he hoped to reduce urban pollution by investing in a novel U.S. car-rental start-up.

Yet the $100 million from eBay Chairman Omidyar and his wife, Pam, both 38, stands out for several reasons. It's a record dollar commitment by an individual to the microfinance industry, he says.

The industry began about 30 years ago in rural Bangladesh when economics professor Muhammad Yunus launched what is now Grameen Bank. It has 3.7 million borrowers, virtually all women, relying on the bank's nearly 1,300 branches covering 46,000 villages. Repayment rates are 95% to 98%, says Grameen Foundation USA, the bank's U.S. affiliate.

Since Grameen's launch, a network of other microlenders — as many as 10,000 — has sprung up worldwide, lending about $24 billion annually, says the Microcredit Summit Campaign, funded partly by Omidyar. Over the next 10 years, he expects the Omidyar-Tufts Microfinance Fund could unleash $1 billion in loans, many to women, as capital is repaid, then lent again. That could attract billions more from Wall Street.

It is the biggest — though not the last — such gift from a man with very deep pockets: Omidyar, with $10 billion, ranks No. 18 on Forbes' list of the 400 richest Americans.

Omidyar's capitalist approach to philanthropy could encourage other wealthy entrepreneurs from his generation to follow a similar trail, says Diana Aviv, president of Independent Sector, a charity trade group whose members include stalwarts such as the American Red Cross. "These guys broke the business mold and, in a way, they are trying to break the social-compact mold as well," Aviv says.

Tufts does well as it does good EBay founder Pierre Omidyar's philanthropic operation needed a partner to deploy $100 million for microlending once the tech entrepreneur committed to the idea. Enter Tufts, the 8,500-student university near Boston. That's where Omidyar earned a computer science degree in 1988, and met his future wife, Pam, a biology student. (Pam figures in eBay lore as the collector of Pez candy dispensers who inspired eBay's creation.) Omidyar is a Tufts trustee in addition to being eBay board chairman. With Tufts, Omidyar found a sympathetic ear in Lawrence Bacow, an economist who became the school's president. Moreover, Tufts' Fletcher School says it is the USA's first graduate school for international relations, driving the school's global ambitions. "I think what we're doing here is absolutely consistent with our mission as an institution," Bacow says of the nascent microfinance fund. It will be the single biggest gift Tufts has received, boosting its endowment 11% to $980 million. The gift will be made entirely in eBay stock, Bacow says, and the school will sell the shares over time to diversify the fund's assets. Tufts will not lend money directly to entrepreneurs. Instead, it will make a variety of large investments, mostly loans at first, in private partnerships and investment firms. They, in turn, will support as many as 10,000 non-profit and for-profit groups. The groups lend $40 to $600 at a time, often at 20% interest for three-month terms. Rates often are much higher. Tufts expects to earn 9% on the fund's investments — the same return it now gets on its endowment, says Sally Dungan, chief investment officer. As those investments are repaid, the fund will keep all the principal and half the income for future reinvestment. The other half of the income goes to Tufts. Under an agreement with Omidyar, the school will spend that income on operations, most likely scholarships and faculty support. Assuming the targeted 9% return, the fund could generate $4.5 million in additional annual Tufts scholarships. "A classic case of being able to do well by doing good," Bacow says. — Jim Hopkins, USA TODAY

Omidyar's gambit is not guaranteed. For decades, do-gooders have thrown billions at programs meant to raise living standards for the world's 3 billion poor, many living on far less than $1 a day. "We're talking about deep, intractable problems," says Gene Tempel, executive director of the Center on Philanthropy at Indiana University.

While Grameen Bank has been successful, few have tried what Omidyar seeks on such a big scale: luring risk-averse Wall Street to invest in entrepreneurs such as Bhagyamma Vadla, 26, in the Andhra Pradesh province of southern India.

She started a buffalo-milk dairy and clothes-making business with four loans totaling $674 over the past four years, says Grameen Foundation USA. She now earns $2.44 a day, nearly four times what she earned before the loans.

Driving social good

Google founders Sergey Brin and Larry Page are prime examples of the newly minted billionaires who also believe entrepreneurship can drive social good. Both 32, their wealth has soared to $14 billion each in little more than a year. At the launch of the online giant's initial public offering last year, they said the Google Foundation might someday "eclipse Google itself" in world impact. Last month, they poured $90 million into the newly launched foundation to be given to groups such as TechnoServe in Norwalk, Conn. Among its ventures, TechnoServe will sponsor a contest in Ghana whose winners will get start-up financing.

Microsoft's Gates is taking a different approach, investing money from the Bill & Melinda Gates Foundation into partnerships with pharmaceutical firms that otherwise might not pursue cures with little profit potential. This week's $258 million in grants follow $3.6 billion for global research and development and other efforts since the foundation's launch in 2000.

Social entrepreneurship is also taking place in smaller ways.

Ben & Jerry's co-founder Ben Cohen launched a $5 million venture philanthropy arm in 2000 that's financing New England start-ups to boost the state's rural economy. The Barred Rock Fund's investments include Vermont Mystic Pie in Chester, Vt., a baker creating a market for Vermont apples, and jobs producing them.

In Nashville, retired biotech entrepreneur Joseph Cook created Mountain Group Capital in 2003, a venture fund that invests in U.S. manufacturers with hopes of preserving good jobs in the USA. Cook started the fund with more than $5 million of the money he made as former CEO of Amylin Pharmaceuticals in San Diego.

Calling it "business philanthropy," Cook aims for market-rate profits without cutting employee benefits. "We think a health care plan is an important component of a stable environment where people want to work," he says.

AOL co-founder Case, to be sure, wants to profit from buying majority control of Flexcar in Seattle. It rents cars, many gas-electric hybrids, for a few hours at a time in congested urban areas such as Washington and Los Angeles.

Flexcar could make it possible for city dwellers to give up car ownership, Case says, turning the once "fringy" environmental movement into something more mainstream.

Case says others investing alongside his new $500 million Revolution investment fund include Carly Fiorina, the entrepreneurial former CEO of tech giant Hewlett-Packard.

More Revolution investments are likely; this week, Case resigned as a board member of AOL owner Time Warner to focus on Revolution.

The power of tiny transactions

How did French-born Omidyar, uneasy with sudden wealth and now living in a quiet Las Vegas suburb, decide to become a high-profile champion of microfinance's role in social entrepreneurship?

Omidyar (pronounced "oh-MID-ee-ar") says it was a natural outcome of eBay, the online auctioneer that's become the world's biggest 24-hour garage sale. The Silicon Valley icon, with 168 million registered users worldwide, proved that an enterprise built around millions of tiny transactions can prosper.

EBay, with a $55 billion market capitalization, says more than 700,000 users now support themselves part time or full time as online merchants — a prime example, Omidyar says, of "economic self-empowerment."

About 18 months ago, after learning about microfinance, the Omidyars revamped their philanthropic operation, the Omidyar Network, to invest in for-profit ventures alongside traditional grants to non-profit groups.

The Omidyars have not abandoned traditional philanthropy — giving to charities such as the Red Cross. "I just think the largest potential is in thinking about business as having a social impact," he says.

Housed in Silicon Valley's Redwood City, the Omidyar Network has $400 million in assets and 37 full-time staffers. Before Friday's announcement, it had plowed $15 million into microfinance ventures, including Grameen.

Omidyar figured microfinance needed a big push to prove its profitability and attract really big bucks from Wall Street. "In order to get a large-scale global effort, you need a lot of capital," he says. In other words, "microcredit needs IPO-level capital to demonstrate its true potential as a business," says David Bornstein, author of How to Change the World: Social Entrepreneurs and the Power of New Ideas.

And that, of course, is Omidyar's aim with his $100 million gift.

"Who says philanthropy has a monopoly on making the world a better place?" he says. "There are lots and lots of businesses that make the world a better place by their very existence."

Now, with Friday's announcement, he hopes to prove it.