Efficiency in sectoral allocation of credit in Argentina

Abstract

Based on information for Argentine banks throughout the period 1998-2005, this paper analyzes whether the bank loan portfolio is efficient in the sense of prioritizing the productive sectors with the greatest growth and stability. The statistical and econometric answer of the study is a resounding no. In fact, corporate credit portfolios do not seem to change substantially either in the short or long term and, consequently, have not reacted to the profitability and risk conditions offered by the different sectors. The issue is important from two angles: the first is of private interest and is linked to whether the banks are maximizing their profit; the second is of social interest and has to do with the assumption, rejected here, that credit should accompany (ideally, anticipating) the growth of the most dynamic sectors. The work advances some possible causes of this behavior and discusses policy alternatives.

JEL classification: G21 ; G32