Frequently Asked Questions
Thanks for your interest in Prizma. For quick reference, we have provided some answers to frequently asked questions (FAQ) below. I
Who is this site intended for?
How do I read the pdf files that are on Prizma’s web site?
Where does the money come from?
Are there really poor people in Bosnia-Herzegovina?
Why does Prizma charge interest on its loans if it seeks to help people?
Why does Prizma charge higher interest than banks?
Does Prizma offer services to other organizations?
Q: Who is this site intended for?
This public site (in English and the local language of Bosnia-Herzegovina) is intended primarily for all current and prospective clients, investors/funders and technical assistance providers, those working on microfinance transparency and evaluation, those engaged in economic and social development in the Balkans and elsewhere, colleagues in the region, and Prizma’s Founder and affiliates.
Q: How do I read the pdf files that are on Prizma’s web site?
Like many
other sites on the World Wide Web (WWW), Prizma’s site provides files in pdf
format. Providing files in this format ensures that the formatting of the
document does not change and this is now a widely accepted standard for
distributing files on the
Internet. The good news is that the program that
enables you to read pdf files, Adobe Acrobat, is free and easy to download
from the
Internet. If you wish to install this program, simply
click on the icon to the right.
Prizma began its operations in the summer of 1997. In September 2001 the Organization registered as a microcredit organization and became legally independent from its Founder ICMC. Due to the new law on microcredit organizations, Prizma Mikro registered as the Microcredit fondation in May 2008.
Q: Where does the money come from?
Prizma started with financial support from the United Nation’s High Commissioner for Refugees (UNHCR) and the Bureau for Population, Refugees and Migration (BPRM) of the U.S. Government. Prizma now funds its growth through progressive capitalization of surpluses it generates and by borrowing funds. So far, Prizma has realized successful cooperation with the following investors: Blue Orchard, Cordaid, Deutsche Bank, EFSE/KfW, Hypo Alpe Adria Bank, IFAD and Federal Minisstry of Finance of the BiH, ICO- Spanish Government, Incofin-Impulse, Novib, Oikocredit, Raiffaisen Bank, Triodos, UMCOR, UNDP, USAID etc.
Prizma has thus far served primarily rural areas and small towns of the Federation (FBiH) of Bosnia-Herzegovina. In 2002 Prizma started expanding it's operations to serve communities in the Republika Srpska (RS).
Q: Why does Prizma charge interest on its loans if it seeks to help people?
Poor people are willing and able to pay…
More than 30 years of experience around the world confirms that poor people are able and willing to pay for services that enable them to improve their lives. Prizma explains clearly to applicants what the costs are before they borrow. Acting in this way, Prizma has maintained strong portfolio quality since it started in 1997.
Lack of funds…
Historically, anti-poverty programs throughout the world have never been capable of reaching and helping more than a small fraction of the billions of poor people in the world―there are simply not enough charitable funds to reach all of these people. Likewise, for Prizma to serve and improve the lives of large numbers of people in Bosnia-Herzegovina, it needs to remain committed to and focused on this challenge long-term, which requires the Organization to cover all of its costs. To cover its costs and remain viable, Prizma charges interest on the loans it provides.
How it works…
Borrowers pay interest on their loans―enough to cover the expense of making the loan. In this way, each borrower helps pay for the cost of lending to the next person who needs assistance. The more people Prizma serves and the more efficient the Organization becomes the more resources the Organization has to reach more people and reduce the costs to borrowers.
A new paradigm…
This represents a shift among many from viewing microfinance as a tool to direct funds for microenterprise over a limited time to microfinance as a sector of sustainable institutions capable of providing an increasingly broad array of financial services to poor people long-term.
Q: Why does Prizma charge higher interest than banks?
Prizma’s average loan balance is smaller than any other agency in Bosnia-Herzegovina. However, making very small loans is very expensive. One reason that commercial banks don’t lend or provide savings accounts and other financial services to poor people is that they do not believe these people are cost-effective to serve. The other reason banks generally don’t lend to poor people is that they do not trust them to pay for the service (e.g., repay a loan). Prizma not only makes very small loans to these people, but Prizma serves these people directly in their community. Traveling to distant rural areas, often one to two hours from any major town, to provide a small loan to a woman that will enable her to purchase a cow or increase agricultural production and provide for her family is extremely expensive for Prizma.
To continue this service long-term Prizma needs to cover all of its expenses. Each year, Prizma continues to become more efficient and lower its costs. As it does it turns surpluses into more loan fund to reach more people and lower the interest it charges its borrowers.
However, providing very small loans in this way will always be more expensive than providing a few very large loans from a branch office in a major city as banks do. An important lesson learned over the past 30+ years of development finance, is that the cost of service is not usually the most important concern of poor people…access is. So, while the interest rate does matter, securing access to services that non-poor people take for granted represents a profound shift in thinking about the capabilities of poor people―viewing a poor person as an active economic and social agent in society, the community, and their family, rather than a passive victim.
Like all people, poor people deserve fair treatment and good information to make informed decisions in their lives. Therefore, Prizma is committed to providing clear, honest information about its services, ensuring that people understand up front what the cost of service is and the expectations of the relationship. In so doing, Prizma seeks to build strong relationships with clients.
Yes. By profitable we mean that the Organization now covers all of its costs, including adjusting for inflation and any subsidies, to produce a surplus. As a non-profit organization this is not treated as a profit would be treated by a commercial firm. Rather, Prizma capitalizes surpluses into additional loan fund, which enables the Organization to serve more people. To manage performance and ensure full cost-coverage, Prizma treats each branch as a profit center, and Prizma’s branches generally become profitable after one to two years of operation. Costs include operating costs (premises, staff, physical assets, running costs, etc) and financial costs (the cost of capital, the costs of loan loss, etc). Please see the 'Performance' section for current figures. A common term used to indicate the degree to which an Organization covers all of these expenses is ‘Financially Self-Sufficient’ (FSS). As of December 2002, Prizma was 111% financially self-sufficient.
You can help Prizma in four primary ways. First, Prizma needs funds to assist more poor people. You can help by providing funds directly to Prizma. Additionally, you can provide in-kind services (printing, equipment, etc.) to Prizma. Please see our ‘Investors’ Corner’ for more details or contact us directly.
Second, Prizma is growing and seeks bright, honest and flexible staff from all national or ethnic backgrounds, who are committed to Prizma’s mission and values. Please see our ‘Opportunities’ section for current vacancies. If there are no vacancies currently, you may forward your CV and we will review it as new vacancies arise. Unfortunately, we are not able to respond to unsolicited inquiries regarding employment.
Third, if you are willing to volunteer, we are seeking qualified people who can commit at least five hours a week to assist us on very specific projects. Please e-mail us at recruitment@prizma.ba to find out what Prizma’s current needs are and whether you can help.
Finally, Prizma is seeking to expand its informal advisory group nationally and internationally. Advisors are people that have professional experience and are committed to Prizma’s mission and values. This is a volunteer role that offers Prizma additional perspective and advice and the advisor a way to make a difference. Please see our ‘Structure’ section to learn more about our advisory board. If you believe you are able to offer experience on a voluntarily basis, please e-mail us at recruitment@prizma.ba.
Q: Does Prizma offer services to other organizations?
Yes, in addition to its primary work providing financial services, Prizma’s experienced management team does provide limited consultancy to other organizations in the region. In general, Prizma prioritizes its assistance to organizations that are committed to serving poor and low-income people. Please contact us to discuss your need.