TECHNICAL EFFICIENCY OF COMMERCIAL BANKS OF ETHIOPIA (IN THE CASE OF PRIVATE COMMERCIAL BANKS)

Abstract

This paper works technical efficiency of commercial banks of Ethiopia in the case of private commercial banks. The specific objective of the study was to measure the overall technical performance, to measure pure efficiency, to measure the scale efficiency and to identify the problems of inefficient banks. The methodology of the study was investigates efficiency using data envelopment analysis (DEA) in a sample of Ethiopian private commercial banks over the period 2012-2013.Using total deposits and interest income as input and loans and interest expense as output. Entirely secondary data was used in the research and the data was composed of audited financial statement and published materials. The major findings of the study in 2012, by the overall technical efficiency only four banks are efficient but the rest banks were inefficient. In selected year the pure technical efficiency that is efficient are also four the rest banks are inefficient. In 2013 the scale efficiency of LIB, WB, UB and NIB were inefficient. In the DEA analysis we observe no significant growth in productivity during the sampled period. In general, most banks are less efficient. There has been no growth in productivity in private commercial banks.