Assessing the Efficiency and Productivity of Cooperative Credit Unions in Ghana: A Metafrontier Approach

Abstract

The aim of this study is to assess the efficiency and productivity change of three groups of cooperative credit unions (CCUs) in Ghana using a DEA metafrontier and the metafrontier Malmquist productivity index (MMPI) framework. The framework helps to decompose the technical efficiency change and technical change components in the standard Malmquist Productivity Index (MPI) into a pure technical catch-up (PTCU) and frontier catch-up (FCU) in order to account for the catch-up effect. A total of 49 CCUs from the three groups/clusters (parish, community and workers) were assessed, using their audited financial report covering 2008-2012. The empirical results for the metafrontier analysis shows an average group technical efficiency (GE) score of 70.2% and average meta-technical efficiency of 56.7%. The community group recorded the highest efficiency score of 88.1% with respect to the group frontier, while the parish group showed highest efficiency score of 63.3% relative to the metafrontier. The MMPI results show that all the groups declined in productivity, with the parish group being the only group to show progress under GMPI. The PTCU effect showed that the workers’ and the parish groups are shrinking the technology gap between the metafrontier and the group frontier, whereas the community group is increasing the technology gap. The FCU effect also indicated that the workers’ and the parish groups are experiencing an upward shift in the group frontier at a faster rate than the metafrontier. The PTCU and FCU effects indicates that the parish and workers’ groups are shrinking the whole band of technology. The findings provide valuable insight for managers of CCUs to improve on the use of their input resources in order to be productive. Also, managers should keep more focus on University of Ghana http://ugspace.ug.edu.gh xi assessing their operational efficiency in dynamic settings rather than depending on static efficiency measures for improvement.