The financial sector of liberalization and commercial Banks performance in Tanzania:the case of CRDB Bank 1997-2005

This study investigates improvement of productivity using Malmquist Productivity Index (MPI) using CRDB Bank as a case study to represent Tanzanian commercial banks over the period of 1997 to 2005. The study employed non-interest expense as input and non-interest income, interest income, total loans and performing loans as output in the Malmquist index. DEA type MPI is used to measure Total Factor Productivity (TFP) change and the sources for TFP changes across the years. The sample period 1979-2005 incorporate the period after the government of the United Republic of Tanzania enacted a bill on financial sector reforms, thus giving us a better chance to assess the role of financial sector reform in Bank's productivity. The results of this study generally shows that there was a fluctuating trends in Technical Efficiency, with evidence of declining of technical efficiency specifically between 1998 and 1999 and an increase was observed between 1999-2002. Generally the scale efficiency improved during 1998-1999 but declined in 1999-2004 but overall results show an increase in scale efficiency during the sample period of liberalization in CRDB Bank Ltd. The results show that average scale efficiency in the sample period was 1.004 or 100.4 percent, which would suggest that the bank's scale efficiency improved by 0.4 percent during the sample period.