Muhammad Yunus the founder director and owner of the Bangladeshi Grameen Bank has been awarded the 2006 Peace Prize.

It is not often that capitalism and social conscience go together in the same sentence, and that was the reason the Grameen Bank was formed, to bring social responsibility into the world of banking.

The foundation of the work of the World Bank is what is described as macro economics, where economists look at the big picture. For fifty years the World bank and the IMF have created grandiose schemes to eliminate poverty, and in general they have all failed abysmally.

Micro economic theory on the other hand could not look at a smaller picture. The bank target women as the primary lenders. The theory behind this is that women have a reason to employ the family finances for the benefit of the whole family.

The bank lends women to a group of women usually four. They all have to agree to the four year loan and they all have to become chair people and represent the group to the bank for a year.

Whilst this may sound simple many of these women have had no education they are illiterate and innumerate. The loans are small, and a typical project may be for a mobile phone for use as a small business in a remote village, that has no other form of immediate contact with the outside world.

The announcement was made in Oslo by the Nobel committee chairman, Ole Danbolt Mjoes. He said Mr Yunus and the Grameen Bank were being honoured “for their work [in] social and democratic development”.

“Sustainable peace cannot be given [unless] large numbers of people have been given the opportunity to get out of poverty. Development such as this is useful in human rights and democracy.”

He and the bank were being honoured “for their efforts to create economic and social development from below”, Mr Mjoes said.

He explained why the Nobel peace committee had extended the mandate of the prize to someone who had not been involved in peace talks “the bank’s work in creating opportunities for large numbers of people to get out of poverty created the conditions for sustainable peace. Development such as this is useful in human rights and democracy,”

Mr Yunus will receive a prize of 10m Swedish kronor ($1.07m, £730,000). He started the bank in Mr Yunus set up the bank in 1976 with just $27 of his own money. Now the bank has 6.6 million borrowers, of which 97% are women. The model for micro credit has been exported all over the third world.