Abstract
This study sought to estimate the level of technical efficiency and total factor productivity of RCBs in Ghana using Stochastic Frontier Analysis (SFA). The total factor productivity (TFP) was deco...
Highlights
Technical efficiency and productivity remain serious issue with regard to the financial and operational sustainability in banking
The results indicated that average technical efficiency of Rural and Community Banks (RCBs) in Ghana, as a whole is 66% for the true random effects model, and 63% for the random parameter model
In this study we considered stochastic frontier models with time-varying specifications2, which include the Battese and Coelli (1992) model (BC92), the Battese and Coelli (1995) model (BC95), the Greene (2005a) true random effects model (TRE), and the (2005) true fixed effects model (TFE)
Summary
Technical efficiency and productivity remain serious issue with regard to the financial and operational sustainability in banking. With the establishment of the Association of Rural Bank (ARB) Apex Bank, there have been continuous efforts to measure and monitor the performance of RCBs. The aim is to identify resource wastes and improve on efficiency and productivity, based on prudential financial norms required of all the formal banks in Ghana. The ARB-APEX Bank Efficiency Monitoring Unit (EMU) and the Bank of Ghana use accounting-based financial ratios approach to measure and rank RCBs performance. Studies on the efficiency and total factor productivity (TFP) of RCBs in Ghana are largely unexplored, in spite of the importance of such knowledge in the management of RCBs toward operational and financial sustainability. It is for this cause that the thrust of this study is placed.
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