Efficient utilization of resources is critical for effective performance of banks. This paper measured efficiency of
community banks in Tanzania and compares performance between two community banks categories during
2002 2014. Efficiency was estimated usi ng Data Envelopment Analysis (DEA) approach while the independent
samples t test was applied on means of efficiency to compare performance between the banks categories. The
paper establishes that, most community banks were inefficient, suggesting that the re was effect of unnecessary
additional costs on the banks performance. Despite the general poor performance, community banks in Tanzania
were generally operating at a decreasing part of the average cost curve, which granted an opportunity for
expansion an d exploitation of scale economies. The paper further establishes that efficiency of respective
categories of community banks did not differ significantly; implying that the bank type did not matter as regards
efficiency issue. The policy implications are; community banks should effectively manage their cost structure in
order to improve performance, and a separate regulatory framework should be applied to community banks to
take care of their uniqueness.
Efficient utilization of resources is critical for effective performance of banks. This paper measured efficiency of
community banks in Tanzania and compares performance between two community banks categories during
2002 2014. Efficiency was estimated usi ng Data Envelopment Analysis (DEA) approach while the independent
samples t test was applied on means of efficiency to compare performance between the banks categories. The
paper establishes that, most community banks were inefficient, suggesting that the re was effect of unnecessary
additional costs on the banks performance. Despite the general poor performance, community banks in Tanzania
were generally operating at a decreasing part of the average cost curve, which granted an opportunity for
expansion an d exploitation of scale economies. The paper further establishes that efficiency of respective
categories of community banks did not differ significantly; implying that the bank type did not matter as regards
efficiency issue. The policy implications are; community banks should effectively manage their cost structure in
order to improve performance, and a separate regulatory framework should be applied to community banks to
take care of their uniqueness.
