The Nobel Peace Prize for this year was awarded today to the Grameen Bank of Bangladesh and its founder, Muhammad Yunus, 65, for pioneering microcredit — using loans of tiny amounts to transform destitute people into entrepreneurs.

The Norwegian Nobel Committee praised Yunus and his bank for their “efforts to create economic and social development from below”.

Though it is not the first time the committee has chosen to honour economic development as a contribution to world peace, rather than the more usual diplomacy or rights advocacy, it is the first time the prize has been awarded to a profit-making business.

The selection seemed to embody two connected ideas that are gaining ground among development experts: that attacking poverty is essential to peace, and that private enterprise is essential to attacking poverty.

Yunus founded the bank to lend small amounts of cash — often as little as $20 (Bangladeshi taka 1,370) — to local people, almost always women, who could use it to found or sustain a small business by, say, buying a cow to sell milk or a simple sewing machine to make clothing.

Since its creation in 1983, Grameen Bank has made a total of $5.72 billion in such small loans, and has turned a profit in all but three years, including $15 million in 2005.

“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 citation said.

Yunus reacted joyously to the news, AP reported. “I am so, so happy,” he said in a telephone interview from Dhaka, shortly after the prize was announced. “It’s really great news for the whole nation.”

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