Bangladeshi microcredit pioneer Muhammad Yunus and his Grameen Bank were awarded the Nobel Peace Prize on Friday for their work in advancing economic and social opportunities for the poor, particularly women.

The economist and the bank he founded will share the prize. 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.

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.

"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.

Reached by the Nobel foundation, Yunus was excited about winning the prize.

"I'm absolutely delighted. I cannot believe that it has really happened," he said by telephone. "Everyone was telling me that I would get the prize but it came as a surprise. It is fantastic news for the people that have supported us."

Yunus has drawn praise for advancing microcredit, which has been credited with helping poor women to advance their lives and pull them out of poverty.

Microcredit is the extension of small loans, typically US$50 to US$100, to entrepreneurs too poor to qualify for traditional bank loans.

Ole Danbolt Mjoes, chairman of the committee, told The Associated Press 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 recounted that Yunus himself lent US$27, divided among 42 people, in 1976, to help them buy weaving stools.

"Then they got the weaving stools quickly, they started to weave quickly and they repaid him quickly," he said.

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.

Grameen Bank, which was founded by Yunus, provides credit to "the poorest of the poor" in rural Bangladesh, without any collateral, according to its Web site.

"At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the overall development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable," the committee said.

The 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 and the bank will share in the 10 million kronor (euro1.1 million; US$1.4 million) prize as well as a gold medal and diploma.

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

Late speculation on the prize had settled comfortably upon former Finnish President Martti Ahtisaari for brokering an August 2005 peace deal with Indonesia's government and Aceh separatists.

Other contenders, at least in the public domain, included Chinese dissident Rebiya Kadeer who has fought for the rights of Uighur Muslims in China and Chechen lawyer Lydia Yusupova (34-1).

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.