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The Case for Securitization of Credit in Iran

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Abstract

In this paper Imake a strong case for securitization of the existing and future loans in the portfolio of private companies as well as private and government owned banks for mitigating funding shortages in the housing, consumer, and manufacturing sectors of Iran’s economy. There are great deal of asset classes in Iran that can be securitized including: residential mortgages, vehicle loans, credit card receivables, telephone settlements receivables from international companies, oil and gas sold to companies overseas, mineral and metal, agricultural products, electric utilities receivables from residential and commercial customers, and any asset classes with predictable cash flows can be securitized as is the case in the rest of the world. Ilay out mechanisms for securitization of loan assets in the Iranian capital market, albeit, taking account of the rigidity of the prevailing laws governing property rights. Finally, Ihave provided estimates of various parameters of a prototype securitization of IR850 trillion residential mortgages into four tranches of sequential-pay structure in Iran that is expected to appeal to wider classes of investors with different investment horizon, risk return profile and maturity structure.

Suggested Citation

  • Homaifar , Ghassem A., 2006. "The Case for Securitization of Credit in Iran," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 59(2), pages 175-197.
    • Handle: RePEc:ris:ecoint:0084
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    Keywords

    Securitization; Pass-through; sequential-pay structure;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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