Measuring the Cost Efficiency of Banks Operating in the MENA Region

This paper tried to model the efficiency of banks operating in the MENA region between 2005 and 2011, using the stochastic frontier technique. The sample under study included banks from 11 different MENA countries. The empirical results show that – on average – those banks could save up to 19% of their consumed resources while producing the same level of outputs. We also find a wide difference in efficiency among the MENA banking sectors, with scores ranging between 55% (for Egypt) and 97% (for UAE). Finally, by detecting the impact of several internal and external factors on the efficiency scores, we find that economic growth, inflations rates, corruption, exchange rates, trade openness, size of the government, bank capital, and bank profitability, all have a significant impact on bank efficiency.