Technical and economic efficiency measurement of African commercial banks using data envelopment analysis (DEA)

Mesure de l'efficacité technique et économique des banques commerciales africaines à l'aide de l'analyse de l'enveloppement des données (DEA)

Evans Darko (), Nadia Saghi-Zedek and Gervais Thenet
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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: IGR-IAE Rennes - Institut de Gestion de Rennes - Institut d'Administration des Entreprises - Rennes - UR - Université de Rennes
Gervais Thenet: IGR-IAE Rennes - Institut de Gestion de Rennes - Institut d'Administration des Entreprises - Rennes - UR - Université de Rennes

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Abstract: The paper aims to analyze the Technical Efficiency of 70 Commercial banks from 19 African countries from 2009-2020. Using the Data Envelopment Analysis (DEA) method of the two main approaches, Variable Return to Scale (VRS) and Constant Return to Scale (CRS) technique on a Panel Data. We find that African banks have a higher efficacy assessment with the VRS than the CRS technique, thus, with a Pure Technical Efficiency (PTE) score than Technical Efficiency (TE) . Our findings show that the majority of the banks are operating at very low levels of efficiency (not technically efficient), and inability to optimize the conversion of bank assets and liabilities into loan production for customers. Furthermore, the banks are operating inefficiently in scale, economic, and allocative manner due to mismatches in scale of production. Considering these findings, the implications of these inefficiencies extend to the overall economic development and financial stability of the region.

Keywords: African banking; Data Envelopment Analysis; Technical Efficiency (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-afr and nep-eff
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Published in Management Science Letters, 2025, 15 (3), pp.143-154. ⟨10.5267/j.msl.2024.5.007⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04613082

DOI: 10.5267/j.msl.2024.5.007

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