Problems in Bank Branch Inefficiency: Management, Scale and Location

[[abstract]]This study evaluates the operating performance of a savings bank’s branches using data envelopment analysis. In addition to the identification of the inefficient branches, the study breaks down the constituent components of operating efficiency, investigates scale properties, estimates the potential resource savings and output increments as well as examines the inefficiency problems in depth for each less-productive branch. The main results indicate that the operational inefficiencies are generally contributed by a greater degree of wasteful overuse of resources and to a smaller degree by operating at an inapropriate scale. Moreover, the savings bank is estimated to be able to save annual operating expenses of between USD 3.6 and 3.7 million, and to attract added deposits of between USD 63.9 and 199.9 million as well as to provide additional loans of between USD 9.3 and 15.3 million. Finally, the less efficient branches are identified as having the following disadvantages: weaker managers, diseconomy of scale, and unfavorable location. The findings of the study are consistent with the conceptions of management and provide a verification of their perceptions