Is Credit a Driver for Agricultural Growth? An Iranian Provincial Analysis

Lack of adequate credit is among the major obstacles that Iranian agriculture, like many other developing countries, is facing. This study aimed at exploring the effect of formal credit on agricultural growth in Iran, using a unique provincial panel data set during 20002013. Different panel data econometrics techniques were applied. The main results indicated, on average, positive association between the sector growth and formal credit provided by the Agricultural Bank. The same relation was found for labor force. Meanwhile, public investment showed an indirect impact on the sector growth, though the size of effect differed among provinces. Redistribution of credits based on agricultural potentials of provinces is recommended as a key factor for increasing growthrelated impact of credit.