DHAKA, Bangladesh - The simple yet revolutionary idea of loaning tiny sums to poor people looking to escape poverty by starting businesses won Bangladeshi economist Muhammad Yunus and the Grameen Bank he founded the Nobel Peace Prize on Friday.
Yunus' notion - today, known as microcredit - has spread around the globe in the past three decades and is said to have helped more than 100 million people take their first steps to rise out of poverty.
Some bought diary cows, others egg-laying hens. In recent years, money for a single cell phone has been enough to start thriving enterprises in isolated villages without phone lines from East Asia to West Africa.
"Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty," the Nobel Committee said in its citation in Oslo, Norway. "Microcredit is one such means. Development from below also serves to advance democracy and human rights."
The 65-year-old economist said he would use part of his share of the $1.4 million award to create a company to make low-cost, high-nutrition food for the poor. The rest would go toward setting up an eye hospital for the poor in Bangladesh, he said. The food company, to be known as Social Business Enterprise, will sell food for a nominal price.
The inspiration for Grameen Bank came to Yunus during a trip to the village of Jobra in Bangladesh during the devastating famine of 1976. He met a woman who was struggling to make ends meet as a weaver of bamboo stools. She needed to borrow to buy materials, but because she was poor and had no assets, conventional banks shunned her, and she had to turn instead to local moneylenders whose extortionate rates of interest consumed nearly all her profits.
Yunus, then a professor of rural economics at Chittagong University, gave the woman and several of her neighbors loans totaling $27 from his own pocket. To his surprise, the borrowers paid him back in full and on time. So he started traveling from village to village, offering more tiny loans and cutting out the middlemen. Yunus was determined to prove that lending to the poor was not an "impossible proposition," as he put it.
Yunus is the first Nobel Prize winner from Bangladesh, a poverty-stricken Southeast Asian nation of about 141 million people on the Bay of Bengal.
"I am so, so happy, it's really a great news for the whole nation," Yunus told The Associated Press after the prize was announced. He was reached by telephone at his home in the Bangladeshi capital, Dhaka.
Grameen, which means rural in the Bengali language, was the first lender to hand out microcredit, giving small loans to poor Bangladeshis who did not qualify for loans from conventional banks.
The bank says it has loaned $5.72 billion to 6.6 million Bangladeshi, 97 percent of whom were women, and today provides services in more than 70,000 villages.
The success has allowed Grameen to expand its credit to include housing loans, financing for irrigation and fisheries as well as traditional savings accounts.
Contact the writer: The New York Times contributed to this report.