Title: International trade financing: a comparative study on the performance of state-owned and private commercial banks of Bangladesh
Authors: Hazera Akter; Suborna Barua
Bangladesh Foreign Trade Institute, TCB Bhaban, 1 Karwan Bazar, Dhaka-1215, Bangladesh
Department of International Business, University of Dhaka, Dhaka-1000, Bangladesh
Abstract: We investigate the comparative performance of state-owned commercial banks (SOCBs) and private commercial banks (PCBs) of Bangladesh with respect to efficiency and profitability in financing international trade. Taking a ten-year panel data over 2003-2012 of all four SOCBs and four categorised PCBs, we apply the non-parametric approach data envelopment analysis (DEA) to measure and compare efficiency of the banks using output-oriented Malmquist Productivity Indices (MPI). Furthermore, we develop some specialised profitability ratios on trade financing business of the banks to measure profitability. Our results suggest that PCBs are more efficient and profitable compared to SOCBs' although PCBs provide less trade financing than SOCBs'. The study recommends SOCBs to progress technologically for sustaining themselves in the competitive banking sector of Bangladesh. Moreover, we identify the sources of profitability that would explain the banks' strategic position in trade financing business which would motivate more banks to support international traders through trade financing.
Keywords: international trade financing; bank efficiency; data envelopment analysis; DEA; Malmquist productivity index; MPI; profitability; state-owned banks; commercial banks; private banks; banking industry; Bangladesh.
Int. J. of Monetary Economics and Finance, 2016 Vol.9, No.2, pp.164 - 186
Available online: 10 May 2016