Comparison of Financial Intermediation Efficiency among Commercial Banks in Ethiopia Using Bank Level Data
Keywords:
NIM, intermediation efficiency, bank size, Kruskal Wallis H testAbstract
The study is designed firstly to assess the overall trend of spread rate of Ethiopian banking industry over longer period of time (1990 to 2017) and secondly to statistically determine the mean difference of financial intermediation efficiency among selected commercial banks using an appropriate statistical model. As a sample, seven commercial banks were taken on the basis of availability of data to obtain sufficient number of observation. There is high fluctuation in Spread rate during 1990 through 2000 and only slight ups and downs afterwards (i.e., 2001 to 2017). Using Kruskal Wallis H test, it has been found out that there is significant intermediation efficiency difference among commercial banks in Ethiopia where the government owned commercial bank, which is Commercial Bank of Ethiopia (CBE) has the lowest average NIM, and hence most efficient bank with respect to intermediation efficiency. This could be attributed to its total asset ownership, proxy of bank size, as it controls about 72% of total assets of the sampled banks for this study as compared to that of United Bank (UB), least efficient bank, which has the lowest average size (3.7%) next to Nib International Bank in the sampled banks during study period. This strengthens the argument that size has a positive impact on efficiency intermediation.
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