Productivity Change of the Egyptian Banking Sector: A Two Stage Non-Parametric Approach

This study aims to evaluate of the productivity change of the Egyptian Banking sector by using a data set which cover 14 banks operating in the Egyptian market from 1997 to 2013. We use a non-parametric approach Data Envelopment Analysis based analysis to investigate the productivity change in the Egyptian banking sector. Inputoriented Malmquist indices of productivity change are estimated to measure total factor productivity (TFP) change. The TFP changes are decomposed into the product of technological change and technical efficiency change (catch-up). In the second stage, potential determinants of productivity change are studied using a regression model. We find that Egyptian banking sector experienced a decline in TFP growth at the rate of 2.55% in the whole sample period 1997-03. The estimated regression model identifies some variables which significantly influence the productivity of banks in Egypt. The banks with higher loans to deposit ratio and higher returns on equity have higher productivity growth reflecting on their strong strategic and managerial skills. The size of bank seems to be associated with an increase in productivity. The maturity of a bank (measured by age) is associated with higher productivity. The NIM, NIETA and the financial crisis variables do not seem to be affecting the productivity of the Egyptian banks