Bangladeshi microcredit pioneer Muhammad Yunus and his Grameen Bank won the Nobel Peace Prize on Friday for advancing economic and social opportunities for the poor.

In awarding them the prize, the Nobel Committee said their efforts showed how working to eliminate poverty can result in a lasting peace.

"Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty," the committee said in its citation. "Microcredit is one such means. Development from below also serves to advance democracy and human rights."

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The 65-year-old economist, dubbed the "banker of the poor," and the bank he founded in 1976 will share the prize, including its 10 million kronor (US $1.4 million) check. They were cited for their efforts to help "create economic and social development from below" in their home country by using innovative economic programs such as microcredit lending.

Yunus, the first Bangladeshi to win the Nobel peace prize, almost immediately said he would use part of his share of the award money to create a company that would make low-cost, high-nutrition food for the poor.

Mohamed ElBaradei, who shared the 2005 prize with the International Atomic Energy Agency, said he would give his portion of the cash prize to orphanages in Egypt. In 2004, Kenyan environmentalist Wangari Maathai said she would use the cash to travel the world promoting environmental protection. In 2002, Jimmy Carter said his cash award would probably go to his Atlanta-based Carter Center.

Grameen Bank has been instrumental in helping millions of poor Bangladeshis, many of them women, improve their standard of living by letting them borrow small sums to start businesses.

Loans go toward buying items such as cows to start a dairy, chickens for an egg business, or mobile phones to start businesses where villagers who have no access to phones pay a small fee to make calls.

Grameen Bank was the first lender to hand out microcredit, giving very small loans to poor Bangladeshis who did not qualify for loans from conventional banks. No collateral is needed and repayment is based on an honor system.

Anyone can qualify for a loan - the average is about US$200 - but recipients are put in groups of five and once two members of the group have borrowed money, the other three must wait for the funds to be repaid before they get a loan.

Though the sums are tiny by Western comparisons, the amounts are vital to those who borrow.

"Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development," the Nobel Committee said in its citation.

"I am so, so happy, it's really a great news for the whole nation," Yunus told The Associated Press when reached by telephone at his Dhaka home shortly after the prize was announced.

Grameen Bank claims to have 6.6 million borrowers, 97 percent of whom are women, and provides services in more than 70,000 villages in Bangladesh.

Yunus has drawn praise for developing and advancing microcredit, not just in Bangladesh, but across Asia, Africa and into the Middle East, which has been credited with helping poor women to advance their lives and pull them out of poverty.

Grameen, which means rural in the Bengali language, has since expanded its forms of alternative credit by offering housing loans, financing irrigation and fisheries as well as offering traditional savings accounts.

The Grameen Foundation was founded in 1997 and now has a worldwide network of 52 partners in 22 countries that help some 11 million people across Asia, Africa, the Middle East and the Americas.

Ole Danbolt Mjoes, chairman of the committee, told The AP that Yunus' efforts have had visible results.

"We are saying microcredit is an important contribution that cannot fix everything, but is a big help," Mjoes said, adding that Yunus is a "smart guy. He is creative. His head is in the right place."

Mjoes pointed out that at least three previous prizes have recognized the need to alleviate poverty and hunger.

Those were the 1970 prize to American agriculturalist Norman Borlaug for his program in Mexico to feed the hungry by improving wheat yields; the 1969 award to the Geneva-based International Labor Organization for its efforts to ease poverty; and the 1949 award to Baron John Boyd Orr, as head of the U.N. Food and Agricultural Organization and a leading proponent of the need of nations to make it a public policy to feed the poor.

Yunus told The AP in a 2004 interview that his "eureka moment" came while chatting to a shy woman weaving bamboo stools with calloused fingers.

Sufia Begum was a 21-year-old villager and a mother of three when the economics professor met her in 1974 and asked her how much she earned. She replied that she borrowed about 5 taka (nine cents) from a middleman for the bamboo for each stool. All but two cents of that went back to the lender.

"I thought to myself, my God, for five takas she has become a slave," Yunus said in the interview.

"I couldn't understand how she could be so poor when she was making such beautiful things," he said.

The following day, he and his students did a survey in the woman's village, Jobra, and discovered that 43 of the villagers owed a total of 856 taka (about US $27).

"I couldn't take it anymore. I put the US $27 out there and told them they could liberate themselves," he said, and pay him back whenever they could. The idea was to buy their own materials and cut out the middleman.

They all paid him back, day by day, over a year, and his spur-of-the-moment generosity grew into a full-fledged business concept that came to fruition with the founding of Grameen Bank in 1983.

In the years since, the bank says it has lent US $5.72 billion to more than six million Bangladeshis.

Last year, the United Nations said that women, in particular, were the major benefactors of microcredit, or microloans.

In its citation, the committee noted that "economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male," the committee said.

The announcement that Yunus and the bank had won was a surprise to many pundits and oddsmakers.

The five-member awards committee never says who is being considered only offering up the number of nominees it has received. This year, 191 nominations were received.

But the decision was in line with the committee's goal of encouraging ongoing processes or human rights efforts rather than rewarding completed ones like Aceh or Cambodia.

The peace prize was the sixth and last Nobel prize announced this year. The others, for physics, chemistry, medicine, literature and economics, were announced in Stockholm, Sweden.