School of finance & Financial Management | Business University of Costa Rica
Indeed, financial modeling is something that no one in the BFSI (Banking, Financial Services, and Insurance) sector cannot know since it is the very lifeblood of their work. So, what exactly is financial modeling and why it is so important? To start with, suppose you as a consumer has applied for a loan for you’re to be purchased house, vehicle, other expenses such as weddings, or even personal loans to fund their consumption habits. Now, when you approach a bank or a financial institution, the banker or the financial professional must gauge how creditworthy you are and what the risks are in lending to you. this can be done only if he or she can project your ability to repay the loan over the time period for which the loan would be sanctioned and for this, they must “model” how your repayment profile would look like into the future based on your past credit history, present income, and future earnings. This is where financial modeling comes in handy as it offers a data driven and quantitative approach to “mapping” where you stand with regards to the soundness and financial health when compared to others. Thus, financial modeling provides bankers and financial professionals with a clear picture of your financial standing and creditworthiness.
Keywords: Financial Modeling, Financial Administration, BFSI Sector