Efficiency and productivity analysis in Georgian banking sector: An application of data envelopment analysis

The banking sector is one of the most important components of the financial markets in Georgia as well as in many other countries. The purpose of this study is to examine the efficiency and productivity of 15 commercial banks in Georgia's banking sector between 2013 and 2018 by using Data Envelopment Analysis. In the study, the efficiency and productivity scores of the banks were calculated according to input orientated CCR model under the assumption of constant returns to scale using three inputs (total deposits, total capital, total expenses) and two outputs (total loans and total incomes). The findings of the study show that banks' efficiency levels are high in general and four banks have full efficiency levels in each year of the analysis period. When the findings of the study were evaluated, it was seen that the efficiency in Georgia's banking sector increased in 2013-2015 years. Then it started to decline in 2016-2017 and it increased again in 2018. Considering the Malmquist total factor productivity (TFP) index, the average productivity scores in Georgia's banking sector decreased by 22.3% from 2013-2014 to 2015-2016 and it increased again by 21.3% from 2015-2016 to 2017-2018.