Securitisation has become a vital tool in global financial markets, enabling efficient capital allocation, improved risk management and enhanced liquidity. The concept, which originated in the United States in the 1970s with the emergence of mortgage-backed securities, has since expanded across jurisdictions, including Europe and Asia. While issuance volumes contracted sharply in the aftermath of the global financial crisis, the market has since rebounded, with securitisation once again playing a central role in financing real economy assets across both developed and emerging markets. Today, securitisation and other asset-backed securities (ABS) support a broad range of financing needs, offering borrowers alternative sources of capital beyond traditional bank lending or public debt markets.

Despite rapid economic development and increasingly sophisticated capital markets, the UAE securitisation market remains relatively underdeveloped. Yet demand for diversified funding, the growth of non-bank lending and increased regulatory clarity are paving the way for renewed interest in both conventional and Sharia-compliant securitisation structures. This article explores the evolving legal landscape in the UAE, the obstacles to onshore securitisation and the use of offshore, Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM)-based securitisations – particularly for fintech-originated receivables.

Why Securitisation Matters for the UAE

A vibrant securitisation market would deliver several benefits to the UAE’s financial ecosystem.

• Diversifying funding sources, especially for SMEs: Bank financing in the UAE tends to favour government-linked or investment-grade companies. Many SMEs and fintechs lack access to affordable borrowing or to public capital markets. Securitisation enables these businesses to tap new pools of institutional capital.
• Lower funding costs through structural arbitrage: Originators can benefit from the difference between the yield paid on securitised notes and the return generated by the underlying receivables. This can create cheaper financing relative to direct borrowing.
• Balance sheet optimisation for financial institutions: By achieving “true sale” treatment, originators – especially banks – can remove receivables from their balance sheets, improving capital adequacy ratios.
• Reducing real estate–related credit concentration: The UAE’s strong real estate market has increased banks’ exposure to mortgage loans. Residential mortgage-backed securities (RMBS) could reduce this concentration risk.
• Transforming illiquid assets into marketable securities: Securitisation converts receivables, rentals, loans, credit card balances and other cash flows into tradable debt instruments, broadening investor participation – including pension funds, insurers and family offices.

Legal Framework and Obstacles to Onshore Securitisation

True sale under the Securitisation Law

The UAE Securities and Commodities Authority (SCA) has taken an important step with Resolution No 22/RM of 2023 on the regulation of securitisation operations (the “Securitisation Regulation”), which formally recognises the concept of a true sale of securitised assets. However, the scope of the Securitisation Regulation is limited – it applies to public and private joint stock companies whose shares are listed on the market exchanges, where the securitised notes are to be listed in the UAE, or where the securitisation transaction is conducted through a securitisation entity regulated by the SCA. The Securitisation Law does not apply to internal securitisation transactions conducted by banks or financial institutions, which are regulated by the UAE Central Bank when the securitised notes are issued on a private placement basis, or securitisation transactions conducted by government entities and fully government-owned companies. As a result, securitisations conducted on a private placement basis fall outside the law, meaning most UAE transactions cannot rely on the statutory true-sale framework.

In addition, registration and disclosure obligations make the regime less practical for many originators, leading to the use of private structures instead.

True sale under the Factoring Law

For private securitisations, which at the moment are the bulk of the market, Federal Law No 16 of 2021 in relation to factoring and the assignment of receivables (the “Factoring Law”) allows the assignment of present and future receivables. Best practice still requires registration in the Emirates International Collateral Registry (EICR) to ensure priority against third parties and notification of assignment to debtors to ensure valid discharge. These steps add an administrative burden that may be impractical in high-volume or revolving portfolios.

SPV structuring challenges

While UAE Commercial Companies Law No 32 of 2021 introduced the concept of onshore SPVs, several structural limitations continue to impede their widespread use in securitisation transactions. The UAE still lacks an incorporated cell company regime, making multi-issuance platforms difficult to implement. In addition, non-consolidation considerations and the nascent state of onshore trust law complicate efforts to achieve the bankruptcy-remote structures typically required by investors. Foreign SPVs face their own constraints, as they are generally prohibited from engaging in commercial activities such as leasing or consumer financing without obtaining the relevant licences. As a result of these issues, most UAE-originated securitisations continue to rely on SPVs established in the Cayman Islands or within the UAE’s common-law financial free zones, particularly the DIFC and ADGM.

Regulated activities

Financial activities such as lending, servicing and finance leasing are heavily regulated. Only UAE Central Bank–licensed institutions may service retail portfolios, making true-sale structures difficult for non-bank or fintech originators. Whilst the originator is typically appointed to act as servicer of the underlying assets, flexibility in licensing is required to allow third-party servicers to enter the market.

Bankruptcy remoteness and insolvency risks

Although securitisation SPVs are traditionally bankruptcy-remote, the UAE Bankruptcy Law (No 51 of 2023) introduces claw-back risks. Transfers of assets to securitisation SPVs could theoretically be challenged in insolvency. This legal uncertainty encourages the use of offshore jurisdictions with well-established insolvency precedents.

Trust structures: new opportunities, but still unproven

The Trust Law (Federal Law No 31 of 2023) is a significant development, enabling trusts with legal personality and segregation of trust assets. It potentially supports securitisation trusts, Sharia-compliant sukuk structures and split beneficial ownership arrangements. However, the regime remains untested in UAE courts. The UAE is a civil law jurisdiction, creating uncertainty around how courts will apply common law trust concepts. Professional trustees must be licensed, and that is a challenge onshore as there is no specific trustee licence at the moment. Until market practice and case law develop, originators may remain hesitant to rely on onshore trust structures for securitisations.

Subordination and tranching

Although a recent Dubai Court of Cassation decision upheld the validity of contractual subordination, insolvency law remains largely untested. Liquidators may still apply equal treatment of unsecured creditors despite agreed waterfall provisions. This creates uncertainty for the multi-tranche structures commonly used in securitisations.

Sharia-compliant securitisations

Sukuk and Islamic securitisations share structural similarities with conventional ABS. However, they must avoid Bay’ al-dayn (sale of debt at a discount or premium), which is a major challenge for securitising debts or receivables. Following the establishment of the UAE Higher Sharia Authority (HSA), stricter application of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards has reinforced limitations on securitising debt-based assets in Sharia-compliant formats.

Tax considerations

The introduction of VAT (5%) and corporate tax (9%) has added new layers of complexity, including, potential tax on the transfer of receivables, servicing fees creating taxable presence, transfer pricing issues and ensuring minimal taxable income at the issuer level.

Onshore SPVs may face greater tax exposure, pushing many issuers towards offshore structures.

Emerging Trends

Offshore and DIFC/ADGM securitisations

Despite significant progress, the combination of legal, regulatory and tax hurdles means that onshore securitisation in the UAE remains relatively uncommon. The overall framework – while evolving – does not yet offer the same level of certainty, simplicity or speed that market participants expect in cross-border or institutional securitisation markets. However, securitisation is undeniably gaining momentum in the region – just not primarily onshore.

ADGM, for example, offers, a predictable common law legal system, a sophisticated SPV regime, clear rules on insolvency, security and trusts, Financial Services Regulatory Authority (FSRA) oversight familiar to global investors and regulatory flexibility for fintech platforms. However, depending on the structure used, securitisations may fall under the parameters of a “regulated activity” for the purposes of the ADGM regulations – thoughtful structuring is required when using these types of structures. A similar regime, and similar considerations, apply in the DIFC.

As a result, given the regulatory landscape in the DIFC and the ADGM, these deals are still predominantly being structured offshore (eg, Cayman Islands), despite gains in the UAE’s offshore jurisdictions.

Fintech receivables

In recent years, the UAE has seen a pronounced rise in the securitisation of fintech-originated receivables, driven by the rapid expansion of alternative lending models. Transactions have increasingly involved buy now, pay later (BNPL) and rent now, pay later (RNPL) portfolios, SME and microfinance exposures, consumer instalment loans, merchant and payment receivables, and even certain forms of insurance-related claims. Private credit funds have become central to this development. As these funds search for high-quality, asset-backed credit opportunities capable of delivering attractive yields, they have emerged as active participants and catalysts in the growth of this segment of the market. For private credit funds, securitisation is increasingly viewed as a scalable, repeatable funding tool – mirroring global practice and supporting the expansion of alternative lending across the Gulf Cooperation Council (GCC).

The quest for RMBS

As valuable as the securitisation of fintech-generated loans and receivables may be for deepening regional funding markets, the real prize for a region so heavily dependent on real estate lies in the development of a sophisticated RMBS market. In this respect, Saudi Arabia is currently ahead. Through the establishment and active role of the Saudi Real Estate Refinance Company (SRC), the Kingdom has made meaningful progress in building the foundations of a secondary mortgage market. SRC has been instrumental in purchasing and warehousing mortgage portfolios, and in implementing funding structures that closely resemble securitisation frameworks.

Yet, despite these achievements, Saudi securitisations have remained almost entirely private. A significant structural obstacle is the absence of a master trust or comparable multi-issuance platform of the kind that underpins the RMBS markets in more developed jurisdictions, such as the UK. Without such a regime, the SRC cannot issue multiple series of notes backed by a single, replenishing pool of mortgages. Instead, each transaction must be structured as a standalone deal, requiring bespoke documentation and individual transfers of title for every pool of mortgage assets. This approach is operationally cumbersome, legally intensive and ultimately impractical at the scale required for a fully public RMBS market.

In the UAE, the securitisation of mortgage loans falls within the scope of the Securitisation Regulation, a regime that remains cumbersome and incomplete for the purposes of developing a fully functional RMBS market. The regulation imposes additional obligations, including the requirement to record transfers of mortgages in a designated register and to provide the SCA with a legal report confirming that key details of the transferred mortgages are consistent with the underlying debtor contracts. These procedural burdens add complexity without supplying the broader regulatory infrastructure typically needed to support large-scale, repeat issuances of RMBS.

Securitisations as a tool for private credit funds

Fund finance in the UAE remains relatively underdeveloped, with activity largely concentrated in the form of subscription credit facilities provided to well-established managers, in particular those with sovereign or quasi-sovereign limited partners. Beyond these structures, access to leverage for private credit and alternative investment funds is limited, particularly when compared with the breadth of fund-level financing available in more mature markets. In this context, collateralised loan obligation (CLO) technology offers a compelling alternative. By enabling funds to securitise portfolios of directly originated loans and raise capital through the issuance of tranched debt, CLOs provide an efficient means of obtaining scalable, long-term financing. As regional credit markets deepen, CLO structures may become an increasingly important component of fund financing for managers operating in the UAE.

Conclusion

The UAE’s securitisation landscape stands at a transitional moment. Although the market remains constrained by regulatory fragmentation, licensing hurdles, tax considerations and an underdeveloped onshore framework, conditions are steadily evolving in a direction that favours greater use of securitisation across asset classes. The introduction of the Securitisation Regulation, the Factoring Law and the Trust Law reflects a growing legislative awareness of the role securitisation can play in deepening domestic capital markets. Yet, in practice, many of these regimes remain too narrow, too procedurally burdensome or too untested to support frequent, large-scale or repeat issuances onshore.

Against this backdrop, most UAE-originated transactions continue to gravitate towards offshore jurisdictions, or to the DIFC and ADGM, where common law structures, sophisticated SPV regimes and predictable insolvency and trust frameworks provide the legal certainty required by institutional investors. These jurisdictions have become the natural home for securitisations of fintech receivables, which now represent the most active segment of the regional market. The rapid growth of BNPL, RNPL, SME and consumer lending platforms – combined with the appetite of private credit funds for high-quality, asset-backed exposure – has given rise to a new generation of securitisation transactions that mirror global practice and are increasingly executed through DIFC/ADGM or offshore vehicles.

Looking ahead, the maturation of a true RMBS market remains the most consequential development for the region. Saudi Arabia’s progress through the SRC demonstrates both the potential and the structural challenges of building a scalable secondary mortgage market in the GCC. The UAE has the necessary ingredients – economic scale, deep real estate exposure and investor demand – but its current regulatory framework for mortgage transfers and securitisation remains too rigid to enable an efficient, repeat-issuance RMBS architecture.

At the same time, securitisation is becoming an important tool for private credit funds seeking leverage in a market where fund finance options remain limited. As the regional credit ecosystem develops, CLO structures and other portfolio-level securitisations offer a credible path for funds to raise scalable, long-term capital, further integrating the GCC into global private credit markets.

Overall, while the UAE’s onshore securitisation regime is still finding its footing, market momentum is building. The combination of fintech growth, investor appetite, offshore structuring capabilities and gradual regulatory reform points towards a future in which securitisation – both conventional and Sharia-compliant – plays a far more prominent role in regional financing. With continued legislative refinement and the emergence of local precedents, the UAE is well positioned to develop a more robust and competitive securitisation market over the coming years.