Is it managerial or scale challenge among savings and credit cooperative societies? Decomposing technical efficiency

Abstract

Technical efficiency measurement helps organisations to identify waste, increase productivity, and make well-informed decisions by demonstrating how well resources are transformed into outputs. The measurement of technical efficiency is important for savings and credit cooperative societies (SACCOs) as it ensures the institutions operate efficiently to enhance their competitiveness. Efficiency also enhances their sustainability, improves financial inclusion, and reduces poverty. The study evaluated the technical efficiency of SACCOs in Eswatini and decomposed it into pure technical and scale efficiency using the data envelopment analysis (DEA). The results have revealed that SACCOs in Eswatini are moderately efficient at 75 percent. This means that the SACCOs exhibit a 25 percent level of wastage. Decomposing the technical efficiency retained 85 percent and 87 percent pure technical and scale efficiency. The results mean that, on average, SACCOs are relatively better off in scale efficiency compared to pure technical efficiency. The results imply that the SACCOs are bedeviled more by managerial inefficiency rather than the wrong scale of operations. The results show that SACCOs operated under decreasing returns, meaning they had not attained the optimum scale of operation. The study recommends improvement in the management capacities to enhance the role of SACCOs.