Credit Rationing and Financial Resource Misallocation in Agricultural Lending A Dynamic Assessment of Bank Keshavarzi of Iran

Abstract

Credit rationing and the allocation of financial resources in the agricultural sector represent critical challenges in the financial management of specialized agricultural banks, as restricted access to credit can affect investment composition, production capacity, and loan repayment performance. This study aims to dynamically assess credit rationing and identify patterns of inefficient financial resource allocation in agricultural lending by Bank Keshavarzi of Iran. The analytical framework focuses on the relationship among credit supply capacity, agricultural financing demand, allocated loan volume, and credit performance indicators. Within this framework, credit rationing is not defined solely as a reduction or restriction in the amount of financing, but also incorporates the extent to which resource allocation corresponds to the actual financial requirements of agricultural activities, their economic capacity, and repayment potential. To achieve this objective, reliable data on agricultural lending and relevant economic variables are examined within a dynamic econometric framework over the study period. The principal variables include agricultural credit volume, credit gaps, agricultural investment, production capacity, macroeconomic conditions, and indicators associated with loan repayment quality. The analytical approach emphasizes that the volume of disbursed loans alone cannot provide an adequate measure of the efficiency of credit policy. Instead, the composition, timing, and direction of financial resource allocation should be assessed simultaneously. Changes in economic conditions and financial constraints are also expected to influence the intensity of credit rationing and the extent to which allocated resources diverge from the actual financing needs of the agricultural sector over time. The findings provide an analytical basis for improving the credit allocation framework of Bank Keshavarzi, strengthening borrower prioritization, reducing inefficient resource allocation, and enhancing the quality of the bank's credit portfolio. The principal contribution of the study lies in integrating credit rationing and financial resource misallocation within a dynamic financial framework and applying this perspective to Iran's specialized agricultural banking context. This approach can provide practical evidence for improving credit decision-making and strengthening financial policy design in the agricultural sector.