Acceptance of securitization in the Gulf region grows

"Over the past few years we have seen a steadily growing interest in structured finance in the GCC region," noted Zeynep Adalan, Director Emerging Markets. "United Arab Emirates, and particularly in the Emirate of Dubai, has shown the highest levels of activity."

Originators throughout the Gulf are beginning to discover the benefits to be gained from securitization.

Ms. Adalan explained: "Securitization has certain advantages over other forms of funding, such as MTN issuances, where the rating on the notes cannot exceed the rating on the issuing entity. The spreads over margin on these issuances are thus higher than those on the higher rated classes of notes in a securitization."

While there is large potential for securitization in the Gulf, there are also some challenges that could hinder the growth of securitization issuance in the region.

"The legal environment is still uncertain and untested, and we have some concerns over specific legal issues," she said. "A further key challenge in this young market is the lack of historical data."

Ms. Adalan conceded that overcoming these hurdles is indeed a challenge for all market participants.

"Nevertheless, we fully expect originators in the Gulf to increasingly look to securitization to fund their future business activities," she concluded.