Bank Deferrals and Identification of Factors Affecting the Improvement of Loans Repayment: A Case Study of Rudsar Agricultural Bank of Gilan Province

Economists emphasize the endogenous and exogenous causes of the bank deferrals related to loan repayment. Whereas banking experts classify the causes of loan default as external and internal organizational factors. According to targets of article 2 of the agricultural bank of Iran the Statute (2020), this bank should provide credit facilities for a better life in the countryside, increase the income level of villagers, increase agricultural production, develop SMEs located in rural areas, and participation in related activities. Therefore, to achieve the goals of providing financial resources, it is important how the resources are absorbed and how they are returned. Studies by Hassanzade and Habibi (2010), Shabani and Jalali (2012), and Bafandeh et al. (2015) regarding the crisis of bank deferrals in Iran indicate that the role of indigenous factors is more decisive than exogenous factors. The study Arabmazar and Roeintan (2013) is dedicated to non-timely repayment of bank facilities have most important to bank deferrals than other factors. Most of Iran's bank deferrals studies paid attention only to exiguous factors and did not pay enough attention to endogenous factors. As observed, recent research has considered the important factors of this bank deferrals problem, but none of them work on the interest factor as a crucial factor, and we must address this in this study.

Theoretical frame work:

In the theoretical section, we draw Minsky's theory concerning bank deferral and financial crisis to provide a theoretical for identifying the factors that have influenced the improvement of loan repayment. Goldsmith (1969) and (1973), McKinnon, and Shaw (1973) argued for financial liberalization versus financial repression. The common denominator in these studies is focused on financial liberalization; setting a ceiling for interest rates inevitably leads to a small constraint on the credit system that the result is a low level of saving and investment.  In contrast, Minsky (1995:1) mentioned that in the post-second World war period, the OECD could control the rate of interest instead of money supply and achieve "the golden age of capitalism".  

Multiple logit regression (MNLR) is simply a generalized or extended dual logit regression with more explanatory variables. In other words, we want to investigate the simultaneous effects of several independent variables on the dependent variable y. MNLR regression is also known as multiple and multi-state logit because it is used to model the relationship between a multi-state response variable and a set of independent variables. A multi-state response variable can be a sequential variable or a nominal variable.                      

Since 1936 there has been a serious debate among Keynesian and Walrasian economists on the role of money and finance. Walrasian economists reject the finance dominance of capitalist economies. While, Mineski (1995: 3), upon on the modern version of the Walrasian of general equilibrium theory, ignores the finance dominance of capitalist economies. If economic theory is to be relevant for the intense finance world in which we live, it fully incorporates financial factors into determining the economy's behavior in the economy. Such a theory should not hold that financial factors are "exogenous shocks" to the economy or explain whatever malfunctioning an economic theory economy is. Money and finance as nominal variables do not play a dominant role in the preferences, commodities, and services of the economy resulting from the incompetence of central bankers.

Result and Suggestions:

Our finding on the empirical sector shows disagreement among economists about the impact of interest rates on bank deferrals. The relationship between loan size and the amount of loan deferral penalty is another of the most challenging issues among theoreticians of loan and credit. Our study results on variables of repayment and extension loan have a significant and negative effect on improving the bank repayment, which in this regard is consistent with the study of Ferdowsipur et al. (2013). Other findings indicate a direct relationship between interest rates and default of loans on the one hand and the number of installments in the improvements of payment of bank claims on the other hand, which is consistent with Ashraghi et al. (2015), Makorere (2014) and Ferdowsipur et al. (2013).