Efficiency and productivity growth of the arab commercial banking sector : a non-parametric approach

Abstract EN

The last 25 years have seen significant structural change in the Arab financial market.

New policies based on financial liberalization and restructuring were implemented with the main objective of fostering competitiveness and enhancing the efficiency and productivity of the banking sector.

Using a non-parametric approach, a DEA-type Malmquist Index, which consists of applying the data envelopment analysis (DEA) to obtain DEA Malmquist Index, this paper investigated the impact of these reforms on the development of the performance and productivity of commercial banks operating in 11 Arab countries over the period 1994-2004.

The Malmquist Index was divided into pure technical change, technological change, and efficiency scale change to investigate the sources of productivity changes, if any.

The majority of banking sectors involved in this study have maintained or improved their efficiency measures.

It should be noted that these improvements are mainly due to positive technological changes and innovations.

The scale efficiency measures do not show any significant influence on these improvements.

However, results show a decline in the total factor productivity (TPF) over the study period in all countries.

A regression of efficiency scores on some environmental and managerial factors was used to investigate the determinants of Arab banking sector efficiency.