Modelling the efficiency of universal banks in Ghana

Abstract

The strategic importance of banks in almost every economy underpins the soaring interest in their sustainability with technical efficiency touted as one of the barometers of sustainability. Using data envelopment analysis, the study measures the technical efficiency and scale efficiency of 23 universal banks in Ghana with 2013 dataset. The results reveal that 11 out of the 23 banks operated efficiently during the year under consideration. Two local banks have been found to be highly robust efficient banks. The average overall technical efficiency of the banks is 89%, suggesting 11% technically inefficiency in the sample. In terms of returns-to-scale in the sample, the results suggest that the predominant form of scale inefficiency is increasing returns-to-scale, implying that most of the banks have the capacity to improve their efficiency by increasing their scale of operations.