The United Nations' headquarters in New York played host last week to a cast of celebrities including Peter Jennings, the ABC news anchor; Ted Turner, founder of CNN; actor, Alan Alda; and supermodel, Vendela.

The luminaries gathered for a fund-raiser for the Grameen Bank, set up by Muhammad Yunus a Bangladeshi professor who has become known around the world as a banker to the poor.

The event also saw the US launch of Prof Yunus's new book Banker to the Poor: Microlending and the battle against world poverty. Prof Yunus has pioneered the concept of microlending, that is, giving credit to very poor people, in an effort to eliminate world poverty.

In his book, he says, by providing minuscule loans to the poorest of the poor, the money will not only help them survive but create the spark of personal initiative and enterprise that will lift them out of poverty forever.

His idea has spread to 40 countries and in the US, there are now four projects under way in Texas and New York. The Economist magazine has written: "The Grameen Bank has become a Mecca for development economists and is being copied around the world." Prof Yunus began by first lending a small amount of money, out of his own pocket, to stool makers who lived near the Chittagong University in Bangladesh where he taught economics. That was in 1976 and the first loan was $27 split between 42 workers who only needed enough money to buy raw materials for their trade. The loans helped these stool makers break out of their cycle of poverty and the money was repaid in full with interest.

Now, the Grameen Bank has 2.4 million borrowers with $2.7 billion in loans throughout 39,000 villages in Bangladesh. In a country of 120 million people, more than half live below or close to the poverty line.

Some 94 per cent of Grameen Bank's borrowers are women, many of whom use it to improve their homes and sanitation needs. "Many of these women had never touched money in their lives," said Prof Yunus in an interview. Grameen Bank covers its costs and is owned by the borrowers. They have two options - a oneyear loan or a 10-year housing loan which must be paid back in weekly instalments.

Grameen Bank now has 1,138 branches and 13,000 staff. "Conventional banks would not lend these people money," said Prof Yunus. "So I gave them non-collateralised loans, based on trust. They would never qualify for loans otherwise." He said the default rate is very low, normally 2 per cent a year.

While Prof Yunus said he expects borrowers "to pay back loans" there can be extraneous circumstances. For example, Bangladesh suffered another devastating flood recently and this meant Grameen Bank had to reschedule payments of long-term loans or give borrowers fresh loans.

"We have to find a solution to the problem," said Prof Yunus.

A spin-off of Grameen Bank in Bangladesh is the Grameen Foundation USA which was set up two years ago by advocates of the Grameen idea.

As well as giving face-to-face loans to people who need them, the Grameen Foundation imports handwoven fabrics like silk from Bangladesh and markets these textiles around the world.

The Grameen Foundation, which is based in Washington DC, advances the work of the Grameen Bank by giving people "individual and personal dignity not charity", said Mr James Sams, chairman. "It helps them to be productive and achieve economic independence."

In the past three months, the Grameen Foundation has set up Project Enterprise Peer Lending programmes in Harlem, New York and Brooklyn, New York. There are two more similar projects under way in Dallas and three in Mexico City.

Laureen, a borrower in Brooklyn who is a single mother of four, said the loans have enabled her to double her day-care centre from seven to 14 children. She had previously been turned down twice for loans and now expects to complete paying her one-year loan in biweekly instalments.

Skymall.com, the e-commerce subsidiary of SkyMall which publishes in-flight catalogues for aircraft, paid for the dinner and reception in the delegates dining room at the UN. Skymall.com teamed up with the supermodel, Vandela Thommessen, who wore a blue silk Vera Wang dress that was hand-woven by Bangladeshi weavers. From June 15th until today, the dress was being auctioned at the eBay Web site. Other auction items included quilts made from the same handwoven fabric and signed copies of Prof Yunus's new book.

The money raised by the online auction will go towards schools for the children of handloom weavers in Bangladesh and towards the projects in the US.