THE CONCEPTS OF PRODUCTIVITY AND EFFICIENCY IN BANKS

Abstract

This paper attempts to differentiate between the concepts of productivity and efficiency in banks. The paper shows that the concept of efficiency is a relative concept determined by the distance between efficiency and ideal levels. Efficiency is about working smarter to get more with less cost. but Productivity aims only at increasing total revenue, which is possible through increased performance and greater results. Thus, the concept of efficiency is more comprehensive than the concept of productivity. The paper also distinguishes between two types of banking efficiency, the first is the concept of X-efficiency, which assumes that efficiency is linked to the nature of the human organization, the second is operational efficiency, which is purely technical concept, it indicates whether a bank uses the minimum amount of input to produce a certain amount of output or increases the amount of output given to a given amount of input.