The Study on the Operating Efficiency of Rural Banks Based on DEA Model: A Case of Jiangsu Province

Abstract

The paper takes Jiangsu province as example in Yangtze River Delta, which is economically developed regions. According to previous research and characteristics of rural banks in Jiangsu Province, the input indexes are selected as the number of employees, the number of outlets, total deposits, business and management fees. And the output indexes include total loans, net interest income and net profit. Using DEA model to analyze the operating efficiency of the 65 rural banks in 2016, the paper compares the operating efficiency in different regions and different types of originating bank. The analysis shows that, compared with the central and northern Jiangsu, operating efficiency of rural banks in southern Jiangsu is generally high. The comprehensive technical efficiency value of sample banks that originated by the state-owned banks and joint-stock banks is significantly higher than that originated by rural commercial banks and city commercial banks. Finally, the paper puts forward some suggestions on how to improve the operating efficiency of rural banks.

Determinants of Regional Owned Rural Banks Efficiency Level in Indonesia

“…NPL and LDR do not have a tendency to increase the efficiency level of regional BPRs, this is in line with research conducted by Muazaroh et al (2012) who found that NPL had no significant effect on bank profit efficiency and Perwitaningtyas & Pangestuti (2015) who found no effect between LDR and bank efficiency. Total assets have a tendency to increase the efficiency level of regional BPRs according to the research of Muazaroh et al (2012); Yusniar (2011);Perwitaningtyas & Pangestuti (2015) and Ghozali & Subandi (2014). average are quite high (>5%) even though the NPL model does not have a significant tendency to affect the efficiency level of regional BPRs.…”

“…Based on ownership, the average efficiency of regional BPRs is better than private BPRs. Research conducted by Lingjuan et al (2017) in Jiangsu Province, China also research the operational efficiency of BPRs by region and ownership using the DEA method. The results of study are that BPRs in the southern Jiangsu region have the highest average operating efficiency and BPRs with joint stock ownership have the highest average operational efficiency of BPRs, followed by government-owned BPRs.…”

Determinants of Operating Efficiency for the Jordanian Banks: A Panel Data Econometric Approach

“…Haq et al (2010) analyzed the cost efficiency of 39 microfinance institutions in Asia, Africa, and Latin America. Lingjuan et al (2017) examined 65 rural banks in China's Jiangsu Province and concluded that the comprehensive technical efficiency value of sample banks originated by state-owned banks and joint-stock banks is higher than that of rural commercial banks and city commercial banks. Chou and Buchdadi (2016) collected information from 164 rural banks on Java Island.…”

Efficiency Comparison between Conventional and Islamic Rural Banks in Sumatra during the COVID-19 Pandemic

“…,Mongid et al (2009),Berger & Humphrey (2011), Septianto & Widiharih (2010, andWelani et al (2016) analyse the efficiency of conventional rural banks, whileAgustina et al (2019),Muhari & Hosen (2014),Sadono (2017), andDefung et al (2019) evaluate the Islamic rural banks' efficiency performance in Indonesia. Furthermore, rural bank efficiency has also been measured in other countries, including in the Philippines byDesrochers & Lamberte (2005), in Ghana byIddrisu (2014), in China byLingjuan et al (2017), and several works in India(Ibrahim, 2010;Khankhoje & Sathye, 2009;Mohindra & Kaur, 2011) However, understanding the financial performance of both types of rural banks is essential. Most existing studies analyse separately the performance of conventional and Islamic rural banks, although research that comprehensively analyses and compares both types of rural banks in terms of their efficiency and financial performance has recently been carried out by researches includingIswandari & Anan (2017) andJatmiko (2017).Iswandari & Anan (2017) compared …”