Operating Efficiency Measurement of Commercial Banks of Bangladesh: A DEA Approach
Keywords:
Data envelopment analysis (DEA), Efficiency, Bank, Decision Making Units (DMUs)Abstract
This paper attempts to measures the efficiency of some selected commercial banks (19) both from private (15) and public (4) sectors in Bangladesh with nonparametric method of Data Envelopment Analysis as a smart and powerful alternative to traditional efficiency measures. The performance evaluation of business has taken high profile in the climate of micro-economic reform in the recent past. The real wealth of banks can be increased by increasing the inputs available to the banks. That is by discovering new resources and using the existing resources more efficiently. Efficiency gains in the banking sector of the country will make the country domestically and internationally more competitive and capable of generating more income and employment opportunities in the country. An important objective of these measures is to assist to identify the way of increasing the operational efficiency of the banking sector as a whole as well as of individual institutions. In fact, policy makers are trying to identify the reasons of high level of cost of banking in Bangladesh that are usually viewed as a result of inefficiency. The study finds that among the sample banks Arab Bangladesh Bank is the star performers and Jamuna bank is the poor performers only in terms of the selected parameters. The study also identifies the areas of operational inefficiencies and efficiencies both for best and poor performers. This type of analysis can be used for a better quality-benchmark by the individual institutions than using industry averages or a particular peer bank as the benchmark.
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