But even if advisors have clients willing to pony up $50,000 to invest in a deal, the deals are hard to find because most of them are private placements. Finkelstein says he was at a conference in Tucson, Ariz., and he heard a lot of investment advisors saying they had clients in 3% products. They were searching for products that paid more, but they couldn't find anything.

"There are deals out there, but people don't know about them," Finkelstein says.

While many of the retail investors in this marketplace are socially responsible and thus feel they are earning non-monetary dividends by doing something good-Calvert's Web site states that about 10% of its investors choose to earn zero interest!-skeptics say these investors are not being duly compensated for the risks, despite the low default rates. Some question whether retail investors should even be in this market right now.

"There's a lot of confusion about what the returns should be," says Roger Frank, who recently left Benchmark Asset Managers to launch a firm that invests in microfinance projects-and pays higher returns. He wants his new firm to pay rates that are more in line with what emerging market investments might pay. "Calvert notes pay 1%, 2% or 3%. That's low given the risk."

Frank says most microfinance funds are geared toward institutional investors because these instruments are so illiquid no one is sure of their pricing on any given day.

"Typical retail investors need statements that show updates in value, and they need liquidity, and microfinance doesn't provide those things," Frank says. "For all practical purposes, investing in microfinance is not for the retail investor."

Indeed, over the last year, an increasing number of microfinance institutions have entered the market and aggressively tried to gain market share. In this effort, they have become more lax on their lending standards, prompting some of the existing institutions to follow suit so they can remain competitive. The result is that some borrowers have wound up with two, three or four loans from different institutions, creating an over-debtedness that has some people concerned. Default rates in some cities ticked upward, from 1% to as high as 5%, though it's still far less than the defaults experienced by American banks.

"There have been concerns with over-indebtedness over the last six months," says Summers at MicroCapital. "But it has not been catastrophic. In general, especially compared to what's happened in the world outside this market, they're in pretty good shape."

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