Bangladesh's government ordered Nobel laureate Muhammad Yunus from his post as head of his microfinance bank Wednesday — a humiliating blow for an activist whose revolutionary idea of giving out small loans lifted many out of poverty.

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Nobel Prize Winner Muhammad Yunus, founder and director of Grameen Bank, was pushed out by Bangladesh's central bank. ((Lucas Jackson/Reuters))

But the Grameen Bank said he remained in charge and that it would fight the decision.

Bangladesh's central bank ordered him out, arguing that he violated the country's retirement laws, A.F.M. Asaduzzaman, an official at Bangladesh Bank, told The Associated Press. The bank has been notified by letter, Asaduzzaman said, providing no further details. The government owns a 25 percent stake in Grameen, while the remainder of the bank is owned by its borrowers.

In a statement, however, Grameen said Yunus was still holding his post.

Yunus is "continuing his work as the managing director of the bank," said the brief statement signed by Jannat-e-Quanine, general manager of the bank. "Since it's a legal issue, we will fight it legally."

The bank lends small amounts of money to the poor and spurred similar lending practices worldwide. The innovation won Yunus the 2006 Nobel Peace Prize, which he shared with the bank itself.

Yunus is 70, but the country's mandatory retirement age is 60.

Grameen Bank says the normal retirement rule does not apply to it as the bank is run under a special 1983 law. Yunus was appointed managing director of the bank for an indefinite period in 2000 when he reached 60, the bank says.

Recent controversy

Yunus has been mired in controversy after revelations of an unauthorized bank transfer and as the microfinance industry comes under attack for placing onerous conditions on borrowers that led to suicides in India's Andhra Pradesh state last year.

Controversy swirled around Yunus after a Norwegian television documentary that screened in December accused him of transferring Norwegian development funds from Grameen Bank to another venture without prior approval in 1996. Behind the scenes pressure by the Norwegian Embassy in Dhaka resulted in the funds being transferred back to Grameen Bank in 1998.

The Bangladesh government set up a committee in January to look into the allegations and submit a report in three months. A Norwegian investigation that was sparked by the documentary said the matter was resolved when the funds were returned in May 1998.

Yunus is also facing a defamation trial in Bangladesh, where many believe he was a supporter of the former military-backed interim government. A local politician in northern Bangladesh accused Yunus in 2007 of defaming him in an interview in which Yunus said politicians were only motivated by money.

At the time of the remarks, Bangladesh was under a state of emergency and many politicians, including current Prime Minister Sheikh Hasina, were behind bars on charges of corruption. An interim government backed by the country's influential military eventually handed over power to the elected government of Hasina in Jan. 2009.