Mr Yunus, an economics professor, observed that the lack of traditional forms of collateral, especially land, meant the poor were being excluded from mainstream financial services. As a substitute, Mr Yunus formed borrower groups where peer-group pressure – or mutual liability – would guarantee repayment.

He defines this strategy – called microcredit – as "a non-collateral loan for income generation activities addressed to the poorest people, focussing on the poorest women."

The Grameen Bank, which he founded in Bangladesh, put microcredit into practice and became an international model.

Mr Yunus and Grameen were awarded the Nobel Peace Prize in 2006 "for their efforts to create economic and social development from below."

Mr Yunus, who is visiting Sydney, said the rapid, worldwide expansion of microfinance has been way beyond his expectations.

"I was not expecting it to go beyond the village where I was working," he said.

But, looking back, Mr Yunus is also dissatisfied.

"Once it became apparent the strategy could work everywhere I was disappointed," he said.

"It hasn't gone as fast and as deep as it should have ... microfinance is still a footnote in the mainstream banking sector which has not extended itself to the poorest people."

Some enthusiastic advocates of microfinance have labelled it the "best tool" for eradicating poverty.

"I would not go that direction at all," says Mr Yunus, who is now aged 74.

"But I do say everybody is entitled to financial services … access to credit is a human right. A homeless person should have the same right as a rich person to go to a bank and ask for a loan depending on what case he presents."

Microfinance expanded rapidly in many developing countries during the 1990s and 2000s. The strategy has not been limited to developing nations – Grameen has operations in several high-income countries including the United States.

"We have nearly 25,000 borrowers in New York City, all women, and the average loan is US$1500," says Yunus. "The repayment rate is 99.4 per cent."

In several countries – especially in the giant Indian market – some non-government organisations switched to become for-profit microfinance businesses so they could access more funds to lend. Several even listed on the stock exchange.

But in 2010 India's microfinance sector,  one of the world's biggest,  was plunged into crisis after complaints about irresponsible lending, exorbitant interest rates and aggressive debt collection in the state of Andhra Pradesh. One official said at the time that microfinance lenders had "mutated ... to become exploiters of the poor."

Millions of disgruntled micro borrowers in the Andhra Pradesh stopped loan repayments and the stream of cash pouring into the microfinance sector dried up.

The crisis in India cast a large shadow over the strategy of using tiny loans as a solution to poverty. Critics claimed microcredit had ended up being a debt trap for many impoverished families.

Mr Yunus disagrees but is very critical of the aggressive for-profit model that caused problems in India.

"They went berserk to make money for themselves," he said.

"This is not about making money out of poor people – that's what the loan sharks do. I have no sympathy for that whatever."

Mr Yunus claims the crisis in India has not damaged the reputation of the microcredit strategy.

"It brought out the real issues," he said.

"Now people understand what is the right microcredit and the wrong microcredit."

He advocates strong regulations to protect poor borrowers in developing countries including a cap on interest rates.

"People should not be able to use it to make money for themselves," he said.

"The goal is to help people."

What is microcredit?

Microcredit involves tiny loans being provided to impoverished recipients, mostly women, to help them start businesses and improve their incomes. As a substitute for collateral loan recipients join borrower groups where peer-group pressure,  or mutual liability,  is used to guarantee repayment.

The story so far

1976 Muhammed Yunus makes a $27 loan to a poor woman in village of Jobra in Bangladesh.

1983 Grameen Bank founded in Bangladesh.

Mid-1980s Microfinance begins to take root in India and other developed countries.

2000 First Indian NGO switches to for-profit company.

2005 UN's International year of microfinance.

2006 Yunus wins Nobel peace prize.

2007 Mexican microfinancier Banco Compartamos lists on the stock exchange.

2010 Crisis in the giant Indian microfinance sector amid alligations of irresponsible lending, exorbitant interest rates and aggressive debt collection.

2012-14 Mobile phones provide new ways of providing microcredit.