Efficiencies of Pakistani banking sector: A comparative study

This paper investigates a comparison between public, private and foreign banks efficiencies. In Pakistan, financial sector had gone through a phenomenon changes over the past fifteen years. Banking sector particularly grew very rapidly and investor enjoyed very high return. This study also finds that whether high profitability of the banking sector shows their high efficiency or not. For this purpose, a sample of forty commercial banks is taken from the period of 1998-2007. A data envelopment analysis (DEA) is applied to compute the efficiencies of the respective banks. The results show that the overall efficiency of the banking sector in the initial year is matched with the world banking efficiency, but in later years an unsystematic sequence is observed. Initially, foreign and private sector banks are well ahead of pubic sector in term of technical efficiency, but in the later part of the analysis public sector banks are the real difference. The main reason of this change is massive privatization, which is taken place in those years. An aggressive privatization policy leads the inefficiency of private sector in comparative terms.