Technical, pure technical and scale efficiencies of ethiopian commercial banks: An application of data envelopment analysis

The study is carried out to gauge the overall technical, pure technical and scale efficiencies of Ethiopian commercial banks over the period 2000–2009 using the data envelopment analysis. The result of the study reveals that there were rooms for bank managers to curtail the quantity of input utilized, without making any cutback in the level of output, in fact, over the entire period under study. More specifically, the study shows that 78 percent of the inputs consumed by an average commercial bank could suffice to produce what it actually produced over the period 2000–2009. The study also finds that poor managerial performance and inapt choice of scale or size of operation are fundamental causes of overall technical inefficiency of Ethiopian commercial banks. Furthermore, the study reveals that the majority of Ethiopian commercial banks are scale inefficient with majority of them exhibiting increasing return to scale.