The credit for this should really lie with Calex dEUS and Mobius Evalon over at the 360 version of the game.
Anyway... mild spoilers ahead.
When you get to Shanty Town you will eventually meet up with Grim. But before you can reach him you will be ambushed by a host of dynamite throwing psychos. There will be 3 on the lower level and 1 above. The 1 above does not do anything so ignore him. Simply wait until you see one of the 3 on the lower level lighting his dynamite and then shoot him in the leg/arm with the pistol. He will drop the dynamite killing himself and one of his friends. If it doesn't work the first time (or your aim is too good and you get a headshot!) then reload checkpoint and try again.
Note: Other weapons may work, but I tried the rope arrow methods about 30x and it did not.