IJSRP, Volume 6, Issue 9, September 2016 Edition [ISSN 2250-3153]
Ethiopia has no capital market, thus, the majority of investment and saving are through the banking system, hence, it is more important for the public as a whole to find out Relative Technical Efficiency of banks. This study aims to evaluate the relative technical efficiency and productivity change of Ethiopian commercial banks during the period 2007 to 2011. Using Intermediation approach two input variables - fixed asset and labor, and two output variables- total deposits and net loans & advances, - were selected. The study adopts DEA to measure effici3ency of banks and MPI to measure the productivity gains of banks over time. A panel data of ten commercial banks operating in Ethiopia from 2007 – 2011 were collected. The results show that, on average, Ethiopian commercial banks were relatively technically inefficient. Scale inefficiency takes the leading contribution for source of inefficiency. The study also reveals that the average TFP change is 0.965 during the study period. In this case, technical efficiency regress takes the most contributions to the loss of TFP.