Technical Efficiency In Bank Lending and Borrowing: A South African Study

C Muller and G van der Westhuizen

Studies in Economics and Econometrics, 2004, vol. 28, issue 1, 77-88

Abstract: The measure of technical, allocative and economic efficiency is reviewed and it is shown how the estimate of technical efficiency can be obtained using Stochastic Frontier Analysis (SFA). The methodology is applied to monthly observations on branches of a South African bank. There is a clear distinction between the technical efficiency in lending and the technical efficiency in borrowing. The estimates of technical efficiency in lending averaged 67%, (with a highest of 89% and a lowest of 2%), and in deposits (borrowing) it averaged 45%, (with a highest of 99% and a lowest of 3%). The branches appeared to be more technical efficient in managing the liability side of the balance sheet than in managing the asset side of the balance sheet. A reason might be the difference in the communities served by the branches.

Date: 2004
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DOI: 10.1080/10800379.2004.12106361

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