One of the factors influencing urban and regional development is access to financial resources and bank credit. Through mobilizing and allocating financial resources, the banking system provides the necessary conditions for investment, infrastructure development, increased production, and employment generation. In Iran's bank-based economy, bank credit plays a significant role in the development of different regions. However, disparities in the distribution of credit may contribute to regional inequalities. Therefore, examining the impact of bank credit on urban and regional development is essential for economic policymaking and the achievement of balanced development. To this end, data from Iran's provinces over the period 2006–2021 were utilized, and after testing for data stationarity, the proposed model was estimated using panel data techniques.
The findings indicate that per capita capital stock and per capita bank credit granted have had a positive and statistically significant effect on the growth of value added in the economic sectors of the provinces, thereby promoting urban development through increased production and employment. Furthermore, human capital indicators, including the number of university students per capita, the teacher-to-student ratio in secondary education, and the per capita number of physicians and hospital beds, have also exerted a positive and significant impact on urban development. In addition, government expenditure, through the expansion of infrastructure, education, and healthcare services, as well as urbanization through enhanced productivity, concentration of human capital, and improved access to public services, has contributed to per capita income growth and the improvement of urban development across the provinces