Unleashing India's inventive capital: intellectual property as loan collateral

Abstract

ABSTRACT India's knowledge economy thrives on innovation, but financing such ventures requires alternatives to traditional tangible asset-based collateral. This paper explores the potential of intellectual property (IP) as a viable option. While challenges in valuation and enforcement exist, IP holds significant value. It is argued that IP acts as a two-pronged signal for lenders. Strong IP portfolios indicate a borrower's creditworthiness, while the potential loss of valuable IP discourages defaults. However, India's regulatory framework presents hurdles. Streamlining legal procedures, empowering financial institutions to assess IP value, and establishing centralised registries for recording security interests are crucial first steps. Risk mitigation strategies are equally important. Government-backed risk-sharing programmes and promoting IP insurance can incentivise banks and protect all parties. Finally, educating businesses about IP financing opportunities unlocks this avenue for securing funding. By addressing these challenges, India can create a robust environment for IP-based collateral, thereby fuelling economic growth and technological progress.