Measuring the Efficiency of a Sample of Iraqi Banks Using Data Envelopment Analysis (DEA)

Abstract

  The objective of this study is to measure the efficiency of private commercial banks in Iraq using the output-oriented Data Envelopment Analysis (DEA) model. The performance of 12 commercial and Islamic banks was analyzed during the period 2020-2023, The results showed that Al Ahli Bank maintained excellent efficiency throughout the study period according to both CRS and VRS models, while Al Ahli Iraqi Bank achieved excellent efficiency in all periods except 2022. The highest average efficiency was recorded in 2023, whereas 2022 had the lowest efficiency due to the COVID-19 pandemic, Additionally, Iraqi Credit Bank recorded the lowest level of efficiency due to performance fluctuations resulting from structural issues. The study concluded that the inefficiency of some banks is mainly due to poor resource allocation, and that banks experiencing decreasing returns to scale (DRS) face structural problems, such as overstaffing or investment in unproductive assets. The study recommends adopting merger and expansion strategies to enhance the efficiency of underperforming banks. Furthermore, it suggests restructuring low-performing banks by reducing operational costs, improving loan management, and eliminating unproductive assets, instead of continuing with an inefficient business model..