Performance Measure for the Commercial Banks in Bangladesh: An Application of Total Factor Productivity

The performance evaluation of business has taken high profile in the climate of micro-economic reform in the recent past. The real wealth of Bangladesh can be increased by increasing the inputs available to the country. That is by discovering new resources and using the existing resources more efficiently. Efficiency gains in the banking sector of the country will make the country domestically and internationally more competitive and capable of generating more income and employment opportunities in the country. An adequate assessment of efficiency gains requires a range of financial, operational and economic indicators to be applied including Partial Factor Productivity (PFP) and Total Factor Productivity (TFP). Productivity growth is considered to be the best way to measure international competitiveness and economic growth. Estimates of TFP measures will provide rates of growth in the productive efficiency of labour and capital. Relative growth rates will suggest whether TFP growth was predominantly biased towards saving labour or saving capital and other inputs. To date there has not been any serious study on TFP in the Banking sector of Bangladesh. The present study is an attempt to bridge this gap.