Publication
An Evaluation of the Cost and Revenue Efficiency of the Zimbabwean Banking Sector
Banking sector efficiency measures the proximity of a decision making unit to its production possibility frontier, composed of sets of points that optimally combine inputs in order to produce one unit of output. Banking sector efficiency has been of interest to policymakers and scholars for a number of reasons. Efficiency leads to a reduction in spreads between lending and deposit rates which stimulate greater demand for loans and an increase in mobilisation of savings. Wide spreads affect intermediation and distort prices which impairs the role of the financial system. Efficiency contributes to the understanding of the primary monetary policy transmission channel helping policymakers to obtain feedback on how changes in the regulatory environment affect bank efficiency and how efficiency translates into bank performance. Banking sector efficiency assists in benchmarking an individual bank against international best practice and assessing the effect of various policy measures on the sector performance.
May 2017