Efficiency of commercial banks in the gambia: An empirical analysis

This study examines the efficiency (OTE) of commercial banks (CBs) in The Gambia, from 2009 to 2017 by utilizing the non-parametric Data Envelopment Analysis (DEA) method, under the assumption of constant returns to scale and variable return to scale, based on intermediation and production approaches. The study further investigates the influence of internal (bank-specific characteristics) and external (macroeconomic) factors on efficiency measures using the Tobit regression method. The DEA results under both intermediation and production approaches show that commercial banks in the Gambia are not fully efficient during the study period. Generally, under the intermediation approach, the study found that Guaranty Trust Bank (Gambia) Ltd is the most efficient bank in the Gambia, while BSIC bank found to be less efficient bank during the same period. However, under the production approach, the results indicate that Standard Chartered Bank (Gambia) Ltd ranked as the most efficient bank, while Eco bank (Gambia) Ltd appeared as a less efficient bank during the research period. The research showed that the commercial banks in the Gambia were more efficient under the production approach than the intermediation approach. On the other hand, the Tobit regression results under the intermediation approach indicated that Profitability has a positive and significant relationship with overall technical efficiency measures, while Bank Size, Capital Adequacy, Earning and Inflation have a negative and significant correlation with efficiency measures. However, under the production approach, the results demonstrated that Market Power, earnings and GDP have a positive and significant relationship with efficiency measures, while Bank Size and Liquidity have a negative and significant relationship with efficiency measures. This indicates that banks' specific characteristics and macroeconomic factors are the driving and important factors that influence the efficiency of commercial banks in the Gambia and that the banks have more room to improve their efficiency level.