Efficiency Assessment of Mozambican Banks: A Slacks-Based Measure of Efficiency Approach

Abstract

This study aims at assessing the efficiency of the banking sector in Mozambique. Data Envelopment Analysis (DEA) models were applied for that purpose. Concretely, the non-radial output-oriented Slacks-based Measure (SBM-O) model under the assumption of variable returns to scale was applied to assess the technical efficiency of banks. This study is considered one of the first to apply the SBM model to assess the efficiency of banks in Mozambique. Data for the fiscal year 2020 of 16 commercial banks operating in Mozambique were collected. Three input variables were considered: total assets, operating costs, and deposits; and two outputs: net interest income and loans. According to the results, the average efficiency of the Mozambican banking sector was 72.4%, which reveals a low performance of the sector. The SBM-O model found eight efficient banks, which was considered as a reference set for inefficient banks. The results gained can help bank managers in decision-making, especially for those banks classified as inefficient.