Technical efficiency in Botswana’s financial institutions: a DEA approach

Boitnmelo Moffat and Abbas Valadkhani
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Boitnmelo Moffat: University of Wollongong, http://www.uow.edu.au/index.html

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: This paper examines technical and pure technical efficiencies of ten major financial institutions in Botswana for each year during the period 2001-2006 using data envelopment analysis. In order to obtain more robust and reliable results, the sensitivity of our efficiency indices were put into test by choosing three alternative approaches in specifying the mix of inputs and outputs. The empirical results indicate that: (a) no matter which approach and year are taken into consideration, Baroda and FNB (which are both foreign banks) and BSB (which is a publicly owned institution) are consistently among the most efficient institutions and BDC, ABC and NDB are the least efficient ones; (b) the most efficient banks are either small or large institutions in terms of their asset sizes; (c) due to the small sample size, the evidence of a relationship between the age of institutions and their technical efficiencies remains inconclusive. One can conclude that financial institutions can further enhance efficiency by adopting self-service technologies such as telephone and internet banking which can substantially reduce their service delivery costs.

Keywords: Botswana; Technical efficiency; Data envelopment analysis; financial institutions. (search for similar items in EconPapers)
JEL-codes: C14 C61 G2 G21 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2008
New Economics Papers: this item is included in nep-afr, nep-ban and nep-eff
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