Six American scientists and a Turkish writer charged with insulting his country also received the prestigious Nobel Prizes on Sunday with pomp and royal splendor.
Honored in the twin award ceremonies in Stockholm, Sweden, and Oslo, Norway, were findings that cemented the big-bang theory of the universe, broke new ground in genetic research and explored the relationship between inflation and unemployment.
Yunus, 66, often called the banker to the poor, shared the coveted award with his creation, Grameen Bank, for helping people, even beggars, rise above poverty by giving them microcredit — small, usually unsecured loans. The Bangladeshi economist is the developer and founder of the concept of microcredit.
The first Nobel laureate from Bangladesh, Yunus and Grameen Bank bard member Mosammat Taslima Begum accepted the $1.4 million prize from awards committee chairman Ole Danbolt Mjoes at a ceremony in Oslo.
Receiving the award on behalf of the Grameen Bank was Bangladeshi woman Mosammat Taslima Begum, a member of the bank's board, who has herself borrowed money from the bank.
The ceremony was attended by members of the Norwegian Royal family including King Harald, Queen Sonja and Crown Prince Haakon.
In his Nobel lecture Yunus said the world must overcome poverty if it ever wants to achieve peace.
"I believe terrorism cannot be won over by military action. Terrorism must be condemned in the strongest language. We must stand solidly against it, and find all the means to end it. We must address the root causes of terrorism to end it for all time to come. I believe that putting resources into improving the lives of the poor people is a better strategy than spending it on guns," he said.
Grameen Bank, set up in 1983, was the first lender to provide microcredit, giving very small loans to poor Bangladeshis who did not qualify for loans from conventional banks.
No collateral is needed, and repayment is based on an honour system, with nearly a 100 percent repayment rate.
Yunus said the idea has spread around the world, with similar programmes in almost every country.
Yunus described the success of the bank which continues to profit from providing loans to poor Bangladeshi women.
"Grameen Bank gives loans to nearly seven million poor people, 97 per cent of them are women, in 73,000 villages in Bangladesh," said Yunus.
"Grameen Bank gives collateral-free income generating loans, housing loans, student loans and micro-enterprise loans to the poor families and offers a host of attractive savings, pension funds and insurance products for its members," he added.
Nobel Committee chairman Ole Danbolt Mjoes said the award was partially intended as an outstretched hand to the Islamic world in an era where Muslims are often demonized because of terrorism.
"The peace prize to Yunus and Grameen Bank is also support for the Muslim country of Bangladesh, and for the Muslim environments in the world that are working for dialogue and collaboration," he said.
The Nobel Prizes, announced in October, are always presented in the two capitals on Dec. 10 to mark the anniversary of the 1896 death of their creator, Alfred Nobel, a Swedish industrialist who invented dynamite and stipulated the dual ceremonies in his will. The first prizes were handed out in 1901.
Sweden's King Carl XVI Gustaf presented the prizes in medicine, chemistry, physics, literature and economics as trumpet fanfares rang out in Stockholm's blue-hued concert hall.
Awards For Dissident Voices, Innovative Thinking
Turkish writer Orhan Pamuk accepted the literature prize for a body of work that illustrates the struggle to find a balance between East and West. His novels include "Snow" and "My Name Is Red."
Pamuk, 54, was tried earlier this year on charges of insulting his country for acknowledging the mass killing of Armenians in World War I, but the charges were dropped over a technicality.
Swedish Academy permanent secretary Horace Engdahl said Pamuk had made his native Istanbul "indispensable literary territory" equal to Russian novelist Fyodor Dostoyevsky's St. Petersburg and Irish author James Joyce's Dublin.
U.S. researchers swept all the Nobel science awards this year for the first time since 1983.
The Nobel Prize in medicine went to Andrew Z. Fire and Craig C. Mello for discovering a powerful way to turn off the effect of specific genes.
Nobel physics committee chairman Per Carlson said that with their findings, "the first step toward understanding the development of structures in the universe had been taken."
Roger D. Kornberg won the prize in chemistry for his studies of how cells take information from genes to produce proteins, a process that could provide insight into defeating cancer and advancing stem cell research. His 88-year-old father, Arthur, who won the 1959 Nobel Prize in medicine, was attending the ceremony.
Economics winner Edmund S. Phelps was cited for research into the relationship between inflation and unemployment, giving governments better tools to formulate economic policy. The economics award is not an original Nobel Prize, but was created by the Bank of Sweden in 1968.
The award ceremonies were followed by lavish banquets in Oslo and Stockholm, where some 1,300 guests including Sweden's royal family were to attend a white-tie gala dinner.
Cheers From The Beneficiaries Of Microcredit
In Bangladesh, thousands of people set aside their nation's latest political crisis on Sunday to watch live television coverage of their receiving the Nobel Peace Prize in Norway.
Many residents, who stayed glued to their TVs throughout the day to get the latest news on the deployment of army troops to contain a growing political chaos, ended up watching the ceremony, which was broadcast live from Oslo on state-run Bangladesh Television and most private channels.
In Yunus's home district of Chittagong, several thousand citizens squatted or stood around a large screen put up at a stadium.
People clapped and shouted, "Long live Bangladesh" when Yunus spoke a few words in Bangla, the national language, during his Nobel speech.
Abdul Salam, 35, who owns a sports shop near the stadium, said, "He is a son of Chittagong. We are so proud of him, he has brightened our country's image worldwide," said Salam.
Villagers, many of whom have benefited from Grameen Bank's small-loan programs, also watched in groups at local shops.
They were thrilled when one of their own, Taslima Begum, a Grameen borrower from northern Rajshahi district, accepted the prize on their behalf at the Oslo City Hall.
"We are so happy, wish we could all have gone there," said Samida Begum, talking by telephone from Kelia village near Dhaka. Begum runs a phone call shop started with a Grameen Bank loan almost 18 years ago. Her family also owns a poultry shop started with a loan from Grameen.