Productivity change in Sudanese banks

Abstract EN

This paper examines the change in productivity using a panel data of 16 Sudanese banks during the period 1996-2004.

The sample is disaggregated into 14 commercial banks and 2 specialized banks; and into 8 government banks and a similar number of joint-venture banks.

Productivity is measured by the Malmquist Index, and the data were analyzed using the Data Envelopment Analysis (DEA) technique under both the intermediation and production approaches.

The overall results under both approaches suggest that total factor productivity of Sudanese banks increased during the study period.

Banks were able to achieve productivity improvements from becoming more technically efficient than from being more technologically advanced under the intermediation approach while the opposite is true under the production approach.

Results similar in spirit are obtained for groups of banks (commercial versus specialized and government versus joint venture banks), where the improvement in average total factor productivity is attributed mainly to technological improvement than to technical efficiency.

Furthermore, the observed growth in technical efficiency is attributed more to the growth in managerial efficiency than to the growth in scale efficiency.

These results indicate that both the size and technology of Sudanese banks do matter in improving bank efficiency.

Thus, by increasing the scale of their operations and improving the technology they use internally and with customers, it is imperative that Sudanese banks could enhance total factor productivity and offer themselves the opportunity of remaining in business.

This is particularly so in a sector that is increasingly becoming open for foreign banks.