Muhammad Yunus, the 2006 Nobel Peace laureate known as the “banker to the poor”, is to form a political party to try to rescue Bangladesh from a political crisis that has raised the spectre of military rule.

The founder of Grameen Bank raised hopes for a new era of democratic rule in an open letter to the Bangladeshi people exactly a month after the army forced the President to cancel an election and impose a state of emergency.

A military-backed caretaker government took power on January 12, promising to clean up its notoriously corrupt politics and to organise elections as soon as possible, but it has yet to set a date, raising fears of a return to formal military rule in the world’s third-largest Muslim country.

Dr Yunus, 66, who won the Nobel prize for his work of granting small loans to very poor people, lives an austere life in Dhaka, wearing clothes made of a simple cotton cloth that he designed to help poor textile workers. He asked Bangladeshis to send him letters, e-mails and text messages advising him how to build a “Bangladesh we all dream of”.

He said: “The way the present caretaker Government is trying to create an acceptable atmosphere by carrying out necessary reforms has made me optimistic, along with all citizens of the country. In this situation, I feel it with my heart that I should, showing due respect to the people’s expectation of me, participate in the mission of taking the nation to the height it deserves . . . I know that joining politics is to become controversial. I am ready to take that risk.”

His announcement offered the first real prospect of a democratic alternative to the “battling begums” — the two women who have dominated Bangladeshi politics for the past 16 years.

Khaleda Zia, the head of the Bangladesh National Party, and Sheikh Hasina Wajed, who leads the Awami League, have served alternately as prime minister and opposition leader since 1991. The rivalry between the two widows of assassinated former leaders is so fierce that critics say it has turned politics into a violent and corrupt zero-sum contest between private interest groups.

The state of emergency was imposed after weeks of fighting between supporters of the two women paralysed the country and left 45 people dead in the run-up to parliamentary elections that had been scheduled for January 22. Since then the army and police have arrested more than 40,000 people, including 25 senior figures from both parties, in what the caretaker Government says is a crackdown on crime and corruption. Yesterday it moved to depoliticise the judiciary by stripping control of lower courts and court appointments from a government ministry.

Western officials and many ordinary Bangladeshis were so disillusioned with the BNP and the Awami League that they have welcomed the caretaker Government’s actions. British and American officials in particular feared that further political chaos would have played into the hands of Islamic extremists. It remains unclear whether the Government can push through enough reforms to prevent a return to the destructive feuding.

Many people — in and outside Bangladesh — relish the prospect of a third party, especially if it is headed by one of the few unifying figures in the country. However, some analysts say that Dr Yunus is unpopular in the countryside, where farmers complain that Grameen Bank charges too much interest on loans. Others predict that he will struggle to challenge the begums’ influence because of the role that their families played in the formative years of Bangladesh.

Another fear is that he will be overwhelmed by the corruption that pervades politics in the country. Some say that he could do more for Bangladesh by expanding Grameen Bank’s work rather than entering politics.

Dr Yunus said that he could neither guarantee the success of his party, nor ignore the public pressure to enter politics. “Now I can say that at least I tried,” he told reporters as he left Bangladesh for a trip to India.

Grameen Bank

- Founded in 1983 by Muhammad Yunus, who had personally lent money to entrepreneurs refused credit since 1976

- First, 42 people rejected by banks borrowed a total of $27 from Dr Yunus. All repaid their loans

- At the end of 2006 Grameen Bank had lent a total of $1 billion to about seven million people

- Credit is available to 80 per cent of the poor in Bangladesh. The bank plans to reach all by 2010

- 99 per cent of loans have been repaid or refinanced

- Almost all customers are destitute village women

- The bank’s profits last year exceeded $20 million

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