Debt Securitisation As A Form Of Financing

Due to developments in the financial sector, new and innovative financial techniques and instruments have been introduced to supply capital resources. Alternative methods have been created as a substitute to the traditional modes of raising capital, and these new methods are fast gaining popularity. One of these alternative methods is Securitization. A securitization is a fast-growing form of debt financing. It is the process in which certain types of assets are pooled so that they can be repackaged into interest-bearing securities to be sold to investors. The interest and principal payments from the assets are passed through to the purchasers of the securities. Increasing numbers of financial institutions employ securitization to transfer the credit risk of the assets they originate from their balance sheets to those of other financial institutions such as banks, insurance companies, and hedge funds.