Measurement of Efficiency and Productivity Change of Banks in Ghana Using Data Envelopment Analysis Approach

Abstract

The aim of this research is to use the tool of efficiency and productivity to minimise management waste and improve on business practices since banks operating environment are changing. The research design used was the exploratory approach. Panel data from nineteen banks collected from the financial statements of the banks for the period 2015 to 2021 was used in the study. In terms of the banking operation modal, the input-oriented intermediation approach model was used for the study. Data envelopment analysis was also used to analyse the efficiency and productivity using the CCR and BCC model and Malmquist index respectively. Deap version 2.0 software was used to measure the overall technical efficiency, pure technical efficiency and scale efficiency and the DEA Malmquist index was also used to measure and assess changes in total factor productivity changes, technical efficiency and efficiency changes. Most of the banks recorded an improvement in efficiency level with a mean score of 84.5 percent and 90.10 percent using the CCR and BCC model respectively but pure technical inefficiency had a big impact on the inefficiency as compared to scale efficiency with a mean score of 93.7 percent. The overall results from the Malmquist index on productivity factor change show that the total factor productivity change index regressed by 13.5 percent. Technical change is found to be the most important source of productivity decline with a regression of 11.9 percent. Efficiency change regressed by 1.8 percent with its decomposition pure technical change and scale efficiency change regressed by 0.80 percent and 1.1 percent respectively. The regress in total factor productivity change as a result of technical and efficiency changes indicates that there is a great potential for the industry to increase productivity through investment in technology and its utilisation, by constantly equipping personnel with relevant technology advancement. Technical expertise training should be constantly upgraded along with technological evolution.