Increased innovation will drive securitization in the Gulf, Middle East, and North Africa

According to a new report published today by Standard & Poor's Ratings Services the report examines the opportunities and risks presented by securitizations in the region.

"Securitization of receivables presents certain credit, cash flow, structural, and legal challenges for issuers and investors,"

said Gerard Breen, credit analyst, Standard & Poor's Ratings Services in the report, titled Opportunities And Risks In Securitization Of Residential And Consumer Receivables In The Gulf, Middle East, And North Africa.

"Nonetheless, by assuming a cautious approach to mitigating such risks, while simultaneously undertaking a prudent assessment and consideration of local market practices, securitization could potentially achieve ratings commensurate with the overall risk profile of the transaction."

As residential and consumer lending volumes continue to grow at a rapid pace in the Gulf, Middle East and North Africa, Standard & Poor's expects to see increased innovation by local market participants striving to achieve such a balance between risks and their mitigation.

The report said securitization of residential and consumer receivables is generally driven by a confluence of three factors—growth in lending that drives the origination of these receivables, this same growth outstripping conventional funding sources such as deposits and wholesale funding, and the economic feasibility of achieving a net positive funding position versus the yield on those receivables.