Are Commercial Banks Really More Efficient than Agricultural Development Banks? Evidence from Bangladesh
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Date
1992-11
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Publisher
Ohio State University. Department of Agricultural, Environmental, and Development Economics
Abstract
Previous studies have argued that commercial banks are more efficient in making and recovering loans than are development banks. Few studies, however, directly compare the efficiency of the two types of banks operating in the same market area. This study in Bangladesh made such a comparison. A normalized profit function was estimated based on the data collected from rural bank branches for the years 1987 and 1988. The results showed that the nationalized commercial bank branches were relative price efficient with respect to wages, while the development bank branches were relative price efficient with respect to deposit interest rates. The development bank branches were relative technical efficient with respect to loans made, while there was no technical efficiency differences between the two bank types with respect to deposits. These results suggest that the issue of relative bank efficiency is unique to each country and cannot be easily generalized.