Original Research

Decomposition of the technical efficiency of the banking system

Sanderson Abel, Alex Bara, Pierre Le Roux
Journal of Economic and Financial Sciences | Vol 11, No 1 | a160 | DOI: https://doi.org/10.4102/jef.v11i1.160 | © 2018 Sanderson Abel, Alex Bara, Pierre Le Roux | This work is licensed under CC Attribution 4.0
Submitted: 24 January 2018 | Published: 24 April 2018

About the author(s)

Sanderson Abel, Department of Economics, Nelson Mandela Metropolitan University, South Africa
Alex Bara, Department of Economics, Nelson Mandela Metropolitan University, South Africa
Pierre Le Roux, Department of Economics, Nelson Mandela Metropolitan University, South Africa

Abstract

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.

Keywords

commercial banks; technical efficiency; Zimbabwe

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Crossref Citations

1. Measuring the technical efficiency of the listed IT companies: Evidence from Bangladesh
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