The simple yet revolutionary idea of lending tiny sums to poor people to start businesses won Bangladeshi economist Muhammad Yunus and the Grameen Bank he founded the Nobel Peace Prize.

Yunus' notion - known today as microcredit - has in the past three decades spread around the globe and helped hundreds of millions of people earn their way out of poverty. Some bought diary cows, others egg-laying hens.

In recent years, money for a single mobile phone has been enough to start thriving enterprises in isolated villages without phone lines in places ranging from East Asia to West Africa.

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The 65-year-old economist said he would use part of his share of the 10 million kronor ($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 Friday.

"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. "Microcredit is one such means. Development from below also serves to advance democracy and human rights."

Yunus is the first Noble Prize winner from Bangladesh, a poverty-stricken nation of about 141 million people located on the Bay of Bengal.

"I am so, so happy, it's really a great news for the whole nation," Yunus said shortly after the prize was announced Friday. He was reached by telephone at his home in the Bangladeshi capital, Dhaka.

His joy was shared by those his microcredit program has helped. "I can't express in words how happy I am," said Gulbadan Nesa, a 40-year-old who five years ago used 6,000 taka ($90) from Grameen to buy some chickens so she could start selling eggs. She's since taken more loans and expanded into selling building materials. "Not long ago I was almost begging for money to feed my family," she said from Bishnurampur, her village in northern Bangladesh. "Today, I've got my own house and enough money to feed my children and send them to school."

Grameen, which means rural in the Bengali language, 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 for loans, which average about US$200. But there is social pressure to repay the money. Recipients form groups of five and members only qualify for future loans if all are current on their old ones.The results are hard to argue with - the bank says it has a 99 percent
repayment rate.

The bank says it has loaned $5.72 billion to 6.6 million Bangladeshis, 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.

But Grameen is not without critics, many of whom focus on the bank's high interest rates - business loans attract a rate of 20 percent, significantly higher than 10 percent to 15 percent charged by commercial banks. "While the poor pay 20 percent interest for their loan, the rich pay much less. It can't be called social justice," said S.M. Akash, an economics professor at Dhaka University.

How much impact Grameen has had on Bangladesh's economy remains an open question. Poverty has decreased since Grameen was founded in 1983 - Bangladesh's per capita income has grown from US$280 in 1985 to US$440 in 2006, according to World Bank figures.

While the bank was "a factor" in that success, economists "can't apportion exactly how much credit has to go with Grameen," said Jonathan Morduch, an expert on microfinance at New York University. And even if per capita income has increased, overwhelmingly Muslim Bangladesh remains one of the world's poorest countries. In fact, the spread of Yunus's and Grameen's microcredit schemes around the world - they are now considered a key approach to spurring development - is arguably one of the few bright spots for Bangladesh since it won independence from Pakistan in 1973.

In a 2004 interview, Yunus said 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 Yunus met her in 1974 and asked her how much she earned. She replied that she borrowed about five 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. 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 $27). "I couldn't take it anymore. I put the $27 out there and told them they could liberate themselves," Yunus said. The idea was that they buy their own materials and cut out the middleman.

They all paid Yunus back, day by day, over a year, and his spur-of-the-moment generosity grew into a full-fledged business concept.