What is Securitization?
Securitization is the financial process of pooling contractual debts — mortgages, auto loans, credit-card receivables — and selling them as tradable securities backed by those assets.
How It Works
- Originator sells receivables to an SPV.
- SPV issues tradable securities (ABS) backed by the pool.
- Cash collections on the pool service interest and principal on the securities.
Saudi Context
SAMA-licensed Saudi banks have explored mortgage securitization to deepen the secondary market, supported by the Saudi Real Estate Refinance Company (SRC) under PIF.
Example
A Saudi mortgage lender sells SAR 1 billion of home loans to an SPV, which issues sukuk to investors backed by the mortgage cash flows.