Abstract
This paper compares the efficiency of MENA banks with a large group of international banking systems. Using an unbalanced sample including 52 countries over the period 2000–2012, both cost and revenue efficiency are compared. Taking into account the heterogeneity of the technology, we estimate stochastic meta frontier models and identify two important inefficiency components, namely managerial inefficiency and technology inefficiency. Overall, in MENA banks costs could be reduced by 13%, while revenue could be increased by 17% if their banking systems undertake the most advanced banking technologies. We do not find any improvement of this inefficiency over time, but we detect differences in cost inefficiency compared to the banks of the most advanced nations for several cases. The link between managerial efficiency and technology efficiency is also explored by applying Granger causality tests. A bidirectional relationship is evidenced, but the long term impact is in favor of managerial efficiency, which could be the driver to improve technology efficiency in the region, a result conditional on the availability of high qualified human capital in the banking sector.
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