Bank Efficiency in Sub-Saharan African Middle Income Countries

Chuling Chen

No 2009/014, IMF Working Papers from International Monetary Fund

Abstract: We use bank level data to study the efficiency of banks in Sub-Saharan African middle-income countries and provide possible explanations for the difference in the efficiency levels of banks. We find that banks, on average, could save 20-30 percent of their total costs if they were operating efficiently, and that foreign banks are more efficient than public banks and domestic private banks. Among the factors that could affect the efficiency levels are macroeconomic stability, depth of financial development, the degree of market competition, strong legal rights and contract laws, and better governance, including political stability and government effectiveness. Our findings point to the importance of policies that aim to build stronger institutions, promote more competition, and improve governance.

Keywords: WP; market structure; bank; banking sector; efficiency level; cost efficiency; stochastic frontier analysis; competition; efficiency frontier; efficiency score; input price; minimization problem; efficiency analysis; Commercial banks; Legal support in revenue administration; Foreign banks; Bank deposits; Africa; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 34
Date: 2009-01-01
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Citations: View citations in EconPapers (71)

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