Dubbed the "Banker to the Poor", Yunus and his Grameen Bank won the prize jointly for their role in developing the concept of "micro-credit" -- a system of lending very small sums to people, particularly women, who are too poor to qualify for traditional bank loans, to start up their own enterprises.

The United Nations warmly welcomed the award to Yunus and his bank. Secretary General Kofi Annan's spokesman Stephane Dujarric described them in a statement as "long-standing allies of the United Nations in the cause of development and the empowerment of women".

"Thanks to Professor Yunus and the Grameen Bank, microfinance has proved its value as a way for low-income families to break the vicious circle of poverty, for productive enterprises to grow and for communities to prosper," it said.

In Brussels, the European Union's executive commission expressed "heartfelt congratulations", saying micro-credit was tied into the fight against poverty and supported individual initiatives.

"That corresponds to our development philosophy," the commission said in a statement.

France and Germany also hailed the announcement, with German Chancellor Angela Merkel calling it a "good and noteworthy decision", and French President Jacques Chirac hailing micro-credit as an "intelligent and generous measure, based on the dignity of the human."

In Spain, King Juan Carlos and Queen Sofia -- who has for years been a supporter of micro-credit -- and the country's Socialist government congratulated Yunus.

People from other poor countries that believe they could benefit from Yunus' system also expressed their recognition of his work.

Uganda's Finance Minister Ezra Suluma said he was "delighted" and hoped the award would boost the micro-credit programs the African country is introducing.

"Uganda is following his footsteps so that poor communities can access credit," he told AFP. "This prize strengthens some of us who are working towards achieving what he has been doing."

In Rwanda, Albert Kinuma, the managing director of Village Phone, a Grameen-backed scheme that provides telephone services to rural areas, also hailed the award.

Patrice Kayibanda, who used a micro-loan in Rwanda to buy a village phone and now sells the service, said the work of Yunus and Grameen had been "a major blessing".

"I have now repaid the loan (and) at the same time I have managed to keep my children in school through selling the phone service," he said.

A Chinese political figure responded to the prize announcement by calling for Yunus' services. US-based Chinese dissident Rebiya Kadeer asked Yunus to help introduce his poverty eradication concept to minority Uighur Muslims in China.

Non-government campaign groups welcomed the recognition of Yunus' work, highlighting the role of his micro-credit system in development.

Charly Poppe, trade campaigner for Friends of the Earth Europe, based in Brussels, said it highlighted the importance of the economic element of sustainable development.

"It's a recognition that there is indeed a link between economic development and the development of a healthy and liveable environment for everyone," Poppe said.

Yunus, an economics professor, began fighting poverty during a 1974 famine in Bangladesh with a loan of 27 dollars to save a group of villagers from the clutches of moneylenders.

The 66-year-old from Chittagong set up Grameen Bank two years later. It now has some 6.5 million borrowers, most of them women.

The Geneva-based World Business Council for Sustainable Development added its endorsement on Friday. Its spokesman Lloyd Timberlake said Yunus' award would make micro-credit a "mainstream issue".

"Muhammad Yunus has improved the lives of millions by the simple act of offering credit and at the same time has almost single-handedly created the international microcredit boom," he said.

"He's shown it can work, and others seem to be taking up the gauntlet."