Affecting Factors On Credit Diversion in Iran

Nowadays, banking system plays an important role in the economy. In fact, the banks are the service institution that their main task is collecting deposit and lending the credits. One of the principal challenges to the banking system is the improper allocation of credit, which induces credit diversion. The credit diversion occurs due to asymmetric information before and after the lending credit in the partnership and exchange contracts. In this study, we examine credit diversion in 32 areas within the bank A during 2007-2016 with a descriptive-analytical approach. The results show that over these years despite the increase in the number and amount of the credit, the number of cases of credit diversion without supervision greatly reduced.