Sinking Fund

A Sinking Fund is a method used by an organization wherein a pool of money is set aside for the purpose of reducing debt or to cover expenses. This tool is usually encountered in financial institutions such as insurance companies and banks but recent developments has seen this method in operation in residential entities such as condominium units. In Thailand, condominiums resort to sinking funds in order to answer for their daily maintenance and upkeep. The provisions of the law allow the juristic person in charge of the condominium to collect from the unit owners. Such fee shall constitute the Sinking Fund. Having a Sinking Fund allows the individual to reduce credit risk. With a fund on standby, a corporation or individual would be ensured that come emergencies, it will have the necessary funds to cope with the situation. As a result, using a Sinking Fund is the most common form of risk management tool.

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