Efficiency of Lending Sectoral Allocation in Argentina

Based on the information of Argentine banks during the period 1998-2005, this paper analyzes if the bank loan portfolio was efficient in the sense of prioritizing the productive sectors with higher growth and stability. The statistical and econometrical response of the study is an unequivocal no. In fact, the portfolios of loans to companies do not seem to change substantially in the short nor the long term. Consequently, they have not reacted to the profitability and risk conditions offered by the different sectors. This issue is relevant from two perspectives: the first one is of private interest and is linked to whether the banks have maximized their benefit. The second perspective is of social interest and is related to the assumption, rejected in this paper, that credit should accompany (and ideally, anticipate) the growth of the most dynamic sectors. This paper depicts some potential causes of this behavior and analyzes policy alternatives.