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Journal of Finance and Economics. 2016, 4(3), 88-96
DOI: 10.12691/jfe-4-3-3
Open AccessArticle

Technical Efficiency of Credit Unions in Ghana

Eric Fosu Oteng-Abayie1, , Bright Owusu-Ansah1 and Kofi Amanor1

1Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana

Pub. Date: June 22, 2016
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Cite this paper:
Eric Fosu Oteng-Abayie, Bright Owusu-Ansah and Kofi Amanor. Technical Efficiency of Credit Unions in Ghana. Journal of Finance and Economics. 2016; 4(3):88-96. doi: 10.12691/jfe-4-3-3

Abstract

The study examined the technical efficiency of 66 Credit Unions (CUs) in Ghana using a Cobb-Douglas Stochastic frontier model for the period 2009 to 2012. Factors influencing the technical inefficiency of the CUs were also investigated. We applied the production and intermediation approaches to efficiency modelling to select the input and output variables to generate the technical efficiencies of the CUs. The results show average technical efficiency of 53.40% and 57.96% across the sampled CUs over the period for the production and intermediation models respectively. Thus CUs can improve inputs use by about 47% and 42% on the average to increase outputs through its production and intermediation channels respectively. We also found staff numbers and productivity as critical inputs that influence technical efficiency of the CUs. Finally, CUs can take advantage of increasing returns in financial intermediation to restructure and engage in mergers to strengthen their capital base and competitiveness in Ghana.

Keywords:
credit unions technical efficiency Stochastic Frontier Analysis (SFA) Ghana

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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