A DEA-Based Evaluation of Scale Efficiency and Resource Optimization of Commercial Banks in Africa

Une évaluation, fondée sur la méthode DEA, de l'efficacité d'échelle et de l'optimisation des ressources des banques commerciales en Afrique

Evans Darko (), Nadia Saghi-Zedek (), Gervais Thenet (), Fred Agbenyo () and Nacasius Ujah ()
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Evans Darko: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, IGR-IAE Rennes - Institut de Gestion de Rennes - Institut d'Administration des Entreprises - Rennes - UR - Université de Rennes
Nadia Saghi-Zedek: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, IGR-IAE Rennes - Institut de Gestion de Rennes - Institut d'Administration des Entreprises - Rennes - UR - Université de Rennes
Gervais Thenet: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, IGR-IAE Rennes - Institut de Gestion de Rennes - Institut d'Administration des Entreprises - Rennes - UR - Université de Rennes
Fred Agbenyo: Institute of Development and Technology Management (IDTM), Cape Coast, Ghana.
Nacasius Ujah: SDSTATE - South Dakota State University

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Abstract: This study evaluates the scale efficiency and resource optimization of 141 African commercial banks from 19 African countries from 2009-2020. Using a Data Envelopment Analysis (DEA) approach. The analysis employs both input-and output-oriented models under the Variable Returns to Scale (VRS) and Constant Returns to Scale (CRS) assumptions on a panel data. The empirical findings show that African commercial banks are operating at an average of 87% of their optimal scale efficiency, with 13% inefficiency is due to suboptimal resource allocation and operational inefficiencies either operating at increasing or decreasing returns to scale. The results further indicates significant poor resource utilization (economic, allocative, cost observed, optimum input cost) persists with a mean economic efficiency and allocative efficiency scores as low as 0.20 and 0.09, respectively. A notable intermediation gap was identified, evidenced by a near-zero negative correlation (-0.019) between deposits and loans Both the VRS and CRS (input-output oriented) models indicates similar efficiency gaps among African banks. The results demonstrate that resource-utilization inefficiency outweighs managerial (pure technical) inefficiency in the African context. Optimizing operational scale and improving the institutional and market conditions that govern resource allocation are essential for enhancing the competitiveness and resilience of African banking systems.

Keywords: African banking; Data Envelopment Analysis (DEA); Scale Efficiency; Financial Intermediation; Resource Utilization; Resource Optimization (search for similar items in EconPapers)
Date: 2026-10-14
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