MUHAMMAD YUNUS, this year’s surprise choice for the Nobel Peace Prize, used his award yesterday to make an impassioned appeal to the West to overhaul the way it tackles poverty in the Third World.

Speaking to The Times at the modest headquarters of his Grameen Bank, the Bangladeshi economist urged the international community to adopt his system of microcredit to help to pull the world’s poorest out of destitution.

“It is not the fault of poor people that they are poor,” Professor Yunus said. As he spoke, he was mobbed by colleagues and well-wishers who posed for photographs and brought flowers to his office in Dkaha.

“The banking system is based on collateral and guarantees and we have proved that you can loan money without them. Our microcredit system until today was a sub-system. Now we should be in the mainstream,” the man dubbed the “banker to the poor” said.

The Norwegian Nobel Committee chose Professor Yunus, out of a field of 191 candidates, as this year’s winner, citing his work as an important step to peace. “Peace cannot be achieved unless large population groups find ways in which to break out of poverty,” said the citation for the award, which is worth Kr10 million (£730,000). “Microcredit is one such means.”

The 66-year-old economist was inspired to create the microcredit system after witnessing a famine in Bangladesh in 1974. He founded the Grameen Bank, which means village in Bengali, to lend small amounts to impoverished villages.

His first loan, worth £15, was made in 1976 to 42 women in the village of Jobra, near his home town of Chittagong, who made bamboo furniture. They sold these items back to moneylenders to repay usurious loans that they had taken out to buy the bamboo. Since then the bank has lent £3 billion to 6.6 million people, 96 per cent of them women. Of this, £2.7 billion has been repaid. The model has been copied in more than 100 countries.

Professor Yunus, who was wearing a cotton shirt made by one of his clients, described the award as fantastic, and pledged to donate the money to good causes. “We have been working for 30 years and we have demonstrated beyond doubt in Latin America, Africa, France, the UK and the USA that microcredit works,” he said.

“The problem with the conventional banking system is that it focuses on a privileged group of people. Two-thirds of the world’s population does not qualify to take out loans from a conventional bank.”

His remarks were seen as a criticism of the way development money is distributed by countries like Britain. Critics claim that little of the billions donated reaches the poor and much is squandered or stolen by corrupt officials.

“Blair and Bush pay lip service to fighting poverty. But they should forget charity. They should be business people, instead,” he said.

Professor Yunus, who makes a point of never giving money to beggars but is prepared to offer them loans, believes that the only way to defeat poverty is helping people to help themselves. “The mindset [in the West] is here is some money, go away. It’s just like with a beggar. They dish out money but that money is going to the rich and corrupt. You have to rethink the way you do business to get people out of poverty.”

Professor Yunus insisted that he was not against the free market, but that he wanted the market to be free for everyone.

“I am a free-market guy and even the poor people should be part of the free market,” he said. “Two thirds of the population in the world are not able to participate, so it is not free.”

Ole Danbolt Mjoes, the chairman of the Nobel Committee, said that one reason Mr Yunus was chosen was his positive role in the Islamic world: “This idea was generated in a mostly Muslim country.”

LESS IS MORE

The average rate of interest for microfinance credit is 35 per cent

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