Competitiveness and Efficiency of the Banking Sector and Economic Growth in Egypt

Authors

  • Sunil S. Poshakwale,

  • Binsheng Qian

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    • Both authors are at the Centre for Research in Economics and Finance, School of Management, Cranfield University. Author to whom correspondence should be sent: Sunil Poshakwale, e-mail: sunil.poshakwale@cranfield.ac.uk. The authors would like to thank Victor Murinde, Kupukile Mlambo and the participants in the workshop on ‘Competitiveness of the Financial Services Sector in Africa’ at the Wits Business School, Johannesburg, in June 2009 for their useful comments.


Abstract

Abstract:  This paper investigates the impact of financial reforms on competitiveness and production efficiency of the banking sector, as well as the short-term and long-term impact on economic growth, in Egypt during 1992–2007. The results suggest that the reforms have a positive and significant effect on competitiveness and production efficiency. Also, the evidence shows that state-owned banks are generally less competitive than private banks and foreign banks are less competitive than domestic banks. The average x-inefficiency of Egyptian banks is around 30 per cent, which is comparable to those reported for other African countries. Finally, there is evidence to suggest a significant relationship between financial bank productive efficiency and economic growth in the short run but not in the long run. Overall, the results support the argument for continuing the financial sector reform programme in Egypt.

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