On a visit to Japan, the world's third largest donor, Yunus said that much of the aid to Bangladesh has had a "very restricted framework" focusing on governments.

Aid becomes "a kind of relationship of one government with another government. Development is a much wider issue than government to government. It should be government to people of a country," he told reporters.

He was in Japan to discuss economic cooperation on a microfinancial level and met with Foreign Minister Taro Aso earlier in the day.

Yunus founded Grameen Bank which pioneered small loans to the very poor traditionally ignored by banks, helping improve the livelihoods of millions of people.

Likewise, Yunus said that foreign aid could help poor people. If poor people used donor money to build a bridge themselves, "every bit of this bridge will go to the poor people," he said.

Poor people "can then develop a business strategy and invest into a second bridge and deal with the donor country -- give us half the money and we'll provide the other half," he said. "Conceptually it can be done."

The 67-year old economist, who briefly flirted with politics amid political uncertainty in Bangladesh earlier this year, said the poor were reliable partners.

He criticised banking institutions "which refuse to extend their service to almost two-third of the world's population telling them they're not credit worthy."

"Poor people are good clients for banking. Their performance is as good and sometimes even better than rich people who borrow from the conventional banks," he said.