When Muhammad Yunus went to the managing director at Janata Bank in Bangladesh in the mid-1970s, he said he had an idea for lending to poor people.

The banker said it was impossible. Poor people don't have collateral, and banks must have it to secure the loan. "It can't be done," he said.

Yunus said it could. He put it to the banker simply: "You don't eat collateral. You want your money back." If one could be sure of getting the money, collateral wasn't necessary.

That simple formula became the basis for Grameen Bank, one of the largest cooperatively owned institutions in Southeast Asia.

It grew from a small group of 42 borrowers in a district near Dhaka, the capital of Bangladesh, to a full-fledged financial institution that has loaned $6.1 billion and recovered $5.4 billion.

In 2006, according to the bank's statements, it made $20 million in profit on $135 million in revenue.

The bank has 7.06 million borrowers, 97% of them women, and has spawned imitators worldwide.

Borrowers own 94% of Grameen Bank's equity. Bangladesh's government owns the other 6%.

So many people and so much money came from Yunus' idea. Because of that, he and Grameen Bank won the Nobel Peace Prize in 2006.

When Grameen Bank started, it operated as a branch of Janata Bank, one of the larger ones in Bangladesh. But bank's management resisted the idea of lending small amounts to poor people, instead sending subpar staff to work with Yunus and simply not cooperating with the Grameen Bank workers.

"There was enormous resistance in the banking sector to allowing Grameen to go forward in any significant way," said Alex Counts, president of the Grameen Foundation, who started working with Yunus in Bangladesh in 1988.

Because Yunus was so determined, even stubborn, the bank grew and eventually was able to stand on its own.

Yunus had such an effect on others, his strong-willed trait became contagious, Counts says.

"He's fundamentally, by temperament, a teacher," Counts said. "He took me aside and tried to give me lots of interesting work to do. His method was to get young people and keep throwing big challenges at them."

In Counts' case, it was running his own branch of the bank and translating training manuals.

Since Grameen's founding in 1976, many people have gone to work for the bank. Employees trying to reach customers initially had to bicycle, walk or boat to remote villages, where electricity was uncommon and floods weren't.

Those employees found inspiration from Yunus.

"Sometimes you meet great people and you get impressed with what they have done," Counts said. "With Yunus, you get impressed with what you can do."

Yunus' interest in poverty came from a mix of background, education and training. Born in 1940 in what was then the province of East Bengal, he was one of 14 children but still enjoyed the comfort of a well-off family and good schools.

Yunus received his master's degree in economics from Dhaka University in 1961. In 1965 he went to the U.S. and earned a Ph.D. in economics from Vanderbilt University. He then served as an economics professor at Middle Tennessee State University until 1972.

Yunus became politically active during that stay. He lobbied Congress to stop military aid to Pakistan, which was battling separatists in the province of East Pakistan.

In 1971 that province became Bangladesh, and Yunus returned. A former teacher urged him to take a job with the government.

Yunus soon saw the government was just as corrupt and ineffectual as the Pakistani regime. So Yunus resigned and joined Chittagong University to teach.

He still sought to generate change, especially during the famine of 1974. Tens of thousands starved. Yunus lost interest in classroom economics. "I was trying to look for some relevance to what I saw around me," he said in David Bornstein's book "The Price of a Dream."

Yunus grabbed onto his Grameen idea while noticing so much foreign aid flowing into Bangladesh. Every year the countryside was flooded with Westerners from a bewildering alphabet soup of organizations.

But the aid wasn't conquering the country's poverty. Yunus decided the problem wasn't a lack of assets, but the need to accumulate them — a way to make money grow.

Bangladesh's peasants often survived by running small businesses, such as selling produce or weaving. Yet they couldn't expand because they couldn't borrow money or open bank accounts.

Essentially they were cut off from the formal economy.

Just as crucial, available cash came from moneylenders who charged high rates and often took what little villagers had when they couldn't pay back. That put the poor in an even worse position.

Lack of access to capital meant many people had to sell their products at the worst time. With no way to invest in storage, small farmers sold their crops right when the price was low because there was so much produce on the market. When the prices were higher, the farmers had nothing in storage to sell.

Seemingly small setbacks also hit hard. A death of an animal could cut into a family's productive capital.

The result was a circle of poverty. In hard times, many people had to offer land as collateral or even payment for food. That dragged down families' ability to build wealth.

Yunus looked at collateral in a new way. He asked why should collateral always be physical? Rather than guarantee the loans with property, he would harness the social pressure that is present in every village to guarantee payment. Instead of focusing on those with the greatest ability to pay, he focused on the people who had the greatest need.

Another tactic was to develop a way of life and set of institutions that would help the rural poor save money and function as insurance.

So Grameen Bank requires that borrowers operate in groups of five. Each member is responsible for all the loans the others take out. Anyone who looks like she might not pay it back is under pressure from the other group members. If anyone defaults, that prevents the others from taking out loans.

Grameen's centers collect the repayments in meetings where all the borrowing groups in a village can see the money and the bank worker. The idea is to have as many eyes on the process as possible, so there is less chance for corruption.

Yunus still heads Grameen Bank and sits on the boards of several organizations and companies. The bank has branched out into other businesses as well, such as telecommunications and yogurt via Grameen Danone Foods.

When Yunus won Nobel's coveted prize, he said he saw it as endorsing Grameen's approach. "If you can bring an end to poverty . . . you can have a more livable situation between very rich people and very poor people, very rich countries and very poor countries," he told the Washington Post. "That's our basic ingredient for peace."

BY JESSE EMSPAK