Efficiency Analysis of Commercial Banks in Tanzania: An Application of Data Envelopment Analysis (DEA) Approach: The Case study of Regional & Small Banks

Abstract

The paper analyzes the efficiency of Regional & Small commercial banks in Tanzania from 2006-2012. It uses a non-parametric approach, the input-oriented data envelopment analysis (DEA) to analyze banks’ efficiency. The findings identify four banks (57.1%) to be fully efficient in the year 2006, three banks in 2007 and 2008, one bank in 2009, 2010 and 2011 and four banks in the year 2012. The overall mean efficiency of banks is 90.4%, this means that, banks could have reduced the inputs by 9.6% without affecting the level of output. The results also show that, four banks, Dar es Salaam Community Bank (DCB), Uchumi Commercial Bank, Mbinga Community Banks and Mwanga Community Bank are the most efficiency banks.

Keywords: Bank efficiency, Banking Sector in Tanzania, Data Envelopment Analysis