Securitisation - An Innovation Tool

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Foreword
Why do we need money? Individuals need money for housing, clothing and food. Organisations on the other hand need money for different reasons – survival, growth, sustainable growth. Organisations need to survive for the shareholders or the investors, the workers and also society on the whole. Organisations can survive only if it makes more money than it spends i.e. it makes a profit. But if the profit made is not enough to add value to its shareholders then the organization is not doing an admirable job.
One of the most wide spread belief is that, for an organisation to survive it must grow and grow at a consistent rate. But growth is not cheap and not quick. Growth needs money and over and above money it requires insight and commitment from top as well as middle management.
Money is required by both individuals and organisations and the purpose for their need may seem different but on a closer look they both are the same. They both need it for survival and for growth. They both need money to create opportunities as well as to give them an advantage over others. But how does one get money?
Individuals may get money by working, inheriting it and also borrowing. But for organisations their sources are quite different and not so limited (if the organisation is ready to experiment). Organisations first get seed capital from the investors or shareholders. But with the limited nature of money and the unlimited nature of growth, organisations now-a-days have to find more innovative and less travelled roads to fulfil their monetary needs.
And this is where Securitisation comes into the scene. Securitisation may be one of the most important financial innovations of recent times. The idea is quite simple; make our inactive /illiquid assets into marketable ones buy packaging homogenous illiquid assets into a group to make them appealing to investors be it individuals, corporates, FIs, FIIs, Mutual Funds, Insurance Companies etc.
Securitisation has already arrived in the US as well as some European and Asian countries and the benefits have been widespread but the popularity of securitisation has yet to be felt in India. The reasons are numerous – depth of the debt market, slow growth of the economy and easy acceptance to new ideas.
But hopefully our corporates as well as our once struggling FIs warm up to the idea of Securitisation and admit it that this not so new concept is here to stay and they should make optimal utilisation of this new development. The benefits are plenty and Securitisation is an Innovative Alternate to their capital raising
 

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