Measuring the efficiency of Pasargad Bank using data envelopment analysis (DEA) technique and comparing it with other banks of the country during the years (1987-1991)

Financial Orientation Master's Thesis of Industrial Engineering

November 2013

Abstract

Evaluating the performance of organizations and internal organizational units is an essential tool for their survival and growth. Among the various models and techniques that are available to evaluate performance, data envelopment analysis is a mathematical technique to evaluate performance based on efficiency. In this thesis, an attempt has been made to calculate technical efficiency and scale efficiency in banks. For this purpose, the DEA linear programming model has been used. The sample used includes 20 banks out of 30 existing banks in the country for the period of 2011-2017. In this research, the inputs include fixed assets, number of branches, total cost, equity and total deposits, and outputs include total facilities granted, total income and total investment of banks. This research is based on the assumption of efficiency compared to the fixed scale of CRS and efficiency compared to the variable scale of VRS with an input-oriented nature and using the DEA Frontier software, and its results are presented based on the average efficiency in 5 years. Under the assumption of CRS  The average efficiency of the country's banks between the years 1387 and 1391  It is equal to 88.45%. and under the assumption of VRS  Also 90.88%  It is And this indicates that the banks with the current input value of 9.12%  They have produced less than the optimal amount. The average efficiency of the scale is also 97.17%  It is And this means that the actual scale of production is 2.83%  It is different from the most productive scale of production.

Key words: data coverage analysis, technical efficiency, efficiency to scale.

Preface:

The issue of performance evaluation has been the concern of managers for a long time, the scientific approach to this issue began at the end of World War II when the first group of scientists were invited to make decisions on war issues, and has expanded significantly until now. In fact, it can be said that these scientists were the first founders of operations research. Evaluating the performance of organizations and internal units is a tool for their growth and survival. Several models and techniques to evaluate performance based on various indicators such as quality, efficiency, income, etc. In the meantime, data envelopment analysis is a mathematical technique to evaluate performance based on efficiency, where efficiency means the ability to produce outputs or provide services with the lowest quality level of required resources. We will also discuss the issue. In chapter 2, firstly, the basic concepts of efficiency and effectiveness and their difference  and banking definitions, the basic concepts of data coverage analysis and presentation of its different models will be covered. Also, in the continuation of this chapter, some of the internal and external researches in the field of efficiency and data coverage analysis model are described. Chapter 3 is dedicated to the description of the data and the presentation of the research and measurement model of the efficiency methods. In chapter 4  The estimation and analysis of the results will be discussed. In chapter 5, it is dedicated to presenting suggestions and results.

Chapter 1: Introduction to generalities

1-1   Introduction

In the market-based economy, the banking system has a very heavy responsibility and is one of the most important economic components of the country. By providing financial capital for economic sectors, banks can provide suitable conditions for investment and increase employment and national production. Even by providing credit to professionals, banks can create new job opportunities and better distribution of income at the community levels. In addition, by keeping cash and facilitating its transfer, banks protect personal and government property and internal and external exchanges.

Banks also play an important role in economic stability as an agent of monetary policy implementation. The threats and pressures caused by globalization and the increasing growth of non-banking financial and credit institutions in recent years have prompted banks to improve their performance in the domestic and foreign markets by establishing research centers and conducting research activities in the field of their status compared to other banks in order to survive and compete in the market.In this regard, a logical and very effective solution can determine the status of banks in terms of overall performance, performing processes related to performance evaluation and benchmarking their status in the market, so that in this way they can improve their current situation while identifying their weaknesses and strengths. This approach has led to new results that can be used in other areas of programming. Also, this use of linear programming leads to new principles in inference from experimental data. which is our guide to calculating the best estimate for each observed activity in the set of activities. This method is contrary to the usual method of averaging observations that is characteristic of statistical and accounting methods. These estimates identify sources of inefficiency in each input and output for each activity. At the same time, it provides a general measure of the efficiency of each unit or activity. Efficiency is one of the most important indicators for evaluating the optimal performance of economic units. The common feature that all the definitions of efficiency have is that an efficient enterprise is one that obtains the most output from the combination of certain inputs. In our country, one of the most important economic units whose efficiency is very important is banks.

Nowadays, banks in all parts of the world with extensive banking operations can provide suitable conditions for growth and progress in various economic sectors. Due to insufficient development of capital markets such as  The stock market in Iran's economy, the banking system has a special importance in the country's financial markets, because in  Banks are responsible for long-term financing. The banking structure of the country is such that by opening various accounts and accepting short and long-term savings and deposits, while maintaining funds as a service for its customers, it provides facility payments, direct investment and other banking services by using labor and physical capital. That is, banks act as a financial intermediary. One of the most important tasks of banks is providing liquidity for investment in various fields and people's consumer purchases. Therefore, incorrect and inefficient performance can cause them problems in performing this task and its consequences will affect the country's economy. Measuring efficiency is one of the basic measures to improve the performance level of banks, which means to determine exactly what resources and to what extent have been consumed, and on the contrary, what has been achieved, and how much? In the current competitive conditions, optimal consumption of inputs and production facilities is necessary. In order to use inputs optimally, the efficiency of economic units is very important. Efficient units not only do not waste resources, but also allocate resources correctly. One of the success factors of advanced countries is to pay attention to the efficiency of economic units. In recent years, the issue of efficiency and productivity of banks has been widely considered, in this regard, the focus has been on allocation and economic efficiency with more colorful cost and income approaches. But technical efficiency, which is a prerequisite for achieving allocative and economic efficiency, is less important, which is not correct with such a process. Because at the beginning of the matter, we must know to what extent a bank has been able to operate optimally in using certain inputs to produce output, and what is the potential of this bank to achieve this goal? Efficiency is a relative concept and shows the comparison between actual and ideal performance. Any organization or collective body  It uses inputs to produce a number of outputs, whether goods or services.

For example, efficiency in bank branches as similar units to inputs such as manpower, facilities, space  and are used to produce outputs such as the amount of granting facilities and the amount of providing services to people and the amount of attracting people's deposits. I have studied all the Iranian banks for which suitable data is available.

1-3  Description and statement of the issue

As mentioned above, efficiency is a comparison between actual performance and ideal performance. The issue of efficiency has deep roots in economic research and the application of these techniques in agricultural units has recently expanded