Efficiency of Commercial Banks in Kenya

Abstract

We looked into Kenyan banks' efficiency and their determinants since 2014 to 2019. To find the efficiency of these banks, we employed Data Envelopment Analysis. In the following stage, a probit model was employed to assess the relationship of commercial banks' efficiency scores with interest rate, bank size, credit risk and liquidity ratio. The study's empirical findings show that interest rate, bank size and liquidity ratio have a positive relationship with banks being efficient or on the efficiency frontier. Larger banks, those charging a higher interest rate and those with high liquidity ratios are likely to be the most efficient in their peer group.