Open AccessDecomposition of the technical efficiency of the banking system
Author(s) -
Sanderson Abel,
Alex Bara,
Pierre Le Roux
Publication year - 2018
Publication title -
journal of economic and financial sciences
Language(s) - English
Resource type - Journals
eISSN - 2312-2803
pISSN - 1995-7076
DOI - 10.4102/jef.v11i1.160
Subject(s) - inefficiency , data envelopment analysis , scope (computer science) , scale (ratio) , order (exchange) , business , returns to scale , economics , industrial organization , operations management , financial system , finance , computer science , microeconomics , production (economics) , mathematics , statistics , physics , quantum mechanics , programming language
The study investigated the technical efficiency of the commercial banks in Zimbabwe during the period 2009–2015. The study entailed the decomposition of the technical efficiency into pure technical and scale efficiency to understand the sources of the technical inefficiency in the commercial banks in Zimbabwe. To accomplish the task, the study sampled 11 commercial banks of which 6 are domestic and the other 5 are foreign banks. The study used the data envelopment analysis method. The results of the study revealed that commercial banks in Zimbabwe are technically inefficient with an efficiency score of 82.9%. The average pure technical and scale efficiency scores were 96.6% and 85.6%, respectively. The results imply that technical inefficiency of the Zimbabwean commercial banks is mainly a result of scale inefficiency emanating from decreasing returns to scale. The deduction is that commercial banks in Zimbabwe are operating at below their optimum capacity and hence have scope to increase their operations in order to improve on technical efficiency.