Securitization: A Technical Guide

This guide introduces MFIs to securitization as a potential source of financing.

Securitization is the packaging of financial assets for sale to investors as securities. MFIs interested in securitization should first check whether a securitization program would provide an added benefit to their capital formation process. The guide does not provide an exhaustive description of all the nuances of securitization. It states that there is no standard form for securitization documents as they vary depending on local laws and regulations, investors’ requirements, and structure of the process.

MFIs can use this guide as general guidance and as a base for negotiating with investors. There may be some conditions in agreements that are considered standard by most investors. However, most conditions are specific to the transaction and should be amended to capture its unique features. The guide:

• Includes a standard agreement;
• Provides tips and suggestions to MFIs for negotiating and redrafting conditions;
• Helps MFIs understand the characteristics of securitization;
• Helps MFIs leverage their knowledge to negotiate preferential terms from investors.