Efficiency of Commercial Banks in East Africa: A Non Parametric Approach

Raphael, Gwahula; China, Press; Jiao, Hei Shi

doi:10.5539/ijbm.v8n4p50

Cited by 14 publications

(16 citation statements)

References 21 publications

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“…As described by Choi and Gutierrez [20] banks can partner with the mobile network operators. Raphael [21] argued that the access to financial services in East African countries is very low, especially for the huge population in the rural areas. In Tanzania, for example, one in six Tanzanian have access to financial services from formal Institutions, i.e., over half of the people in Tanzania are excluded from financial services.…”

Section: Related Literaturementioning

confidence: 99%

Examination of the Status of Financial Inclusion and Its Determinants in Tanzania

Lotto

2018

Sustainability

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Abstract:The primary motive of this paper is to examine the determinants of financial inclusion in Tanzania. The paper borrows data from a household survey conducted by TWAWEZA. Employing the probit regression, the findings of this paper reveal that gender, education, age and income are the pertinent factors which affect the financial inclusion in Tanzania. The paper further shows the following: First, if you are a man, financially stable, have a good education and are relatively older, you then stand better chances of being financially included. The results show that, as the level of education increases, the individual is more likely to be financially included. The possible reason for this observation may be clearly linked with the financial ability of educated individuals to afford holding bank accounts and presenting personal guarantees when required by the banks during loan application because the level of education goes parallel with the income level. In addition, the results confirm a gender gap in formal financial inclusion, and this may be due to the factors such as inability of women to show collateral, their poor financial education awareness and lower business experience. Second, the paper also shows that the factors which affect traditional banking services are the same as those affecting mobile banking services (gender, age, income and education), and that there is a negative trend and a clear departure of customers' usage from banking retail services to mobile financial services. Although this gap has been narrowed recently, the best option with the banking sector is to create more new delivery channels while using mobile financial services as an infrastructure to deepen financial access reaching more un-banked population. The paper, therefore, recommends banks to create more delivery channels while using mobile telecommunication network as an infrastructure to deepen financial access reaching more unbanked people rather than competing with mobile network operators. The findings of this paper may also be used as a wake-up call for policy makers to put more emphasis on women and young people who are often left behind during Government's effort toward reaching the entire population as far as financial inclusion is concerned.

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Section: Related Literaturementioning

confidence: 99%

Examination of the Status of Financial Inclusion and Its Determinants in Tanzania

Lotto

2018

Sustainability

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“…For instance, Berger and Humphrey (1992), Kwan and Eisenbeis (1996), Sensarma (2006), Raphael (2012) and Hughes et al (2016) found higher efficiency for large banks over small banks, while the contrary was found by Altunbas et al (2000), Jemric and Vjucic (2002), Rao (2002) and Aiello and Bonanno (2016). Thus, there is a need for further investigation on bank efficiency in this regard.…”

Section: Introductionmentioning

confidence: 84%

Deposit money banks’ efficiency in three years after, during and before the 2004–2005 consolidation in Nigeria: the puzzle on size

Oke

Ogbuji

Bokana

2017

Banks and Bank Systems

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In this paper, the authors examined the efficiency of deposit money banks (DMBs) in Nigeria in three years after, during and before the 2004-2005 capital consolidation in Nigeria. This consolidation period was the last period the Central Bank of Nigeria implemented an official recapitalization policy of the deposit money banks in the country. The authors predicated the study on a modified intermediation and efficiency measurement frameworks. It utilizes deposits, fixed assets and employees as inputs, whose costs are interest payments, depreciation and staff expenses. Performing loans and advances, investments and liquid assets constituted the output variables. The authors computed the efficiency scores, using the Data Envelopment Analysis (DEA) approach. The data used were obtained from the DMBs that retained their identities and controlled over 75% of the banking industry's total assets. They were purposively selected to maintain data consistency, and were size-classified by total assets. The findings show that small banks tend to be more cost efficient than medium and big banks. More so, medium sized banks tend to be more cost efficient than big banks, while big banks take the lead in cost efficiency score in post consolidation period. Cost efficiency of the banks was the highest during consolidation, followed by pre-consolidation and least in three years after consolidation.

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“…Measuring and evaluating the productive efficiency of Decision-Making Units (DMUs) requires analytic techniques that provide insights beyond those available in accounting ratio analyses (Peacock et al, 2001;Tahir et al, 2010;Rao and Lakew, 2012;Hatami-Marbini and Toloo, 2019). To make the analysis robust, researchers are using frontier analysis methods.…”

Section: Methodsmentioning

confidence: 99%

Resource-based productivity in the closed banking sector: the case of Ethiopian banks

Tarekegn

Liu²,

Xiao³

2022

IJPPM

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PurposeThe current paper's goal is to examine the productivity of the closed banking sector evidenced from Ethiopia. In addition, the inclusion of intangibles on productivity was examined in the current paper.Design/methodology/approachFirst, the standard Malmquist Productivity Index (MPI) was employed for 13 commercial banks for both stages. Second, by excluding the state-owned commercial bank, the analysis employed a bootstrapped MPI for the robust and comprehensive conclusion. Furthermore, from 2010 to 2019, the fixed effect Ordinary Least Square (OLS) regression with balanced panel data was used.FindingsThe standard MPI in both stages shows that the productivity of Ethiopian commercial banks is declining. The technological shock was the main reason for the loss. The catch-up in both stages scored above unity, mainly due to the pure efficiency change. Besides, when combined with tangible resources, the inclusion of resource-based view (RBV) proxy variables reduces technological shock regress and ultimately improves productivity change. The bootstrapped MPI also reveals that technological shock is the primary source of the productivity decline. However, efficiency change also contributes to the productivity decline based on this estimation.Research limitations/implicationsFuture research could examine the more extensive productivity analysis by considering the primary sources of data collections for resource-based variables.Practical implicationsAccording to the study's results, banking regulatory authorities and bank management, including the shareholders, should continue to invest in cutting-edge technology to improve the productivity of the banking sector.Originality/valueThis is the first comprehensive study of productivity for Ethiopian commercial banks based on the standard MPI, bootstrapped MPI, and OLS by incorporating all resources into the analysis.

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Efficiency of Commercial Banks in East Africa: A Non Parametric Approach

Cited by 14 publications

References 21 publications

Examination of the Status of Financial Inclusion and Its Determinants in Tanzania

Examination of the Status of Financial Inclusion and Its Determinants in Tanzania

Deposit money banks’ efficiency in three years after, during and before the 2004–2005 consolidation in Nigeria: the puzzle on size

Resource-based productivity in the closed banking sector: the case of Ethiopian banks

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