Securitization is the practice of creating and selling interests in the returns from a large pool of illiquid assets (assets that cannot easily be transferred).
Securitizing assets with low liquidity, such as loans, allows the owner to sell the assets more easily.
1. Creates of markets in financial claims by creating tradeable securities
2. Spread of holding of financial assets as the security is designed in minimum size marketable lots as necessary
3. Promotion of savings- securitization makes it possible for the simple investors to invest in direct financial claims at attractive rates
4. Reduces costs- The intermediation costs, since the specialized-intermediary costs are service-related, and comparatively lower
5. Risk diversification- Securitization spreads diversified risk to a wide base of investors, with the result that the risk inherent in financial transactions is diffused
6. Focuses on use of resources, and not their ownership as a custodian for the several investors who thereafter acquire such claim