Determinants of Bank Efficiency in the West African Economic and Monetary Union: A Panel Data Approach

In an era where financial stability shapes economic resilience, the efficiency of banking systems becomes a decisive factor for sustainable development. This study aims to identify the determinants explaining banking system efficiency in the West African Economic and Monetary Union (WAEMU) during 2010-2023, using Central Bank of West African States (BCEAO) data and panel data analysis. Return on Assets (ROA), return on Equity (ROE) measure banking efficiency. Results show both ROA and ROE models are globally significant, indicating a robust relationship between the variables and bank efficiency. In the ROA model, “short-term loans” (prct) negatively impact economic performance, suggesting such investments may be suboptimal in WAEMU, while “medium and long-term loans” (prmlt) positively influence economic profitability, showing long-term investments benefit banks. In the ROE model, gross domestic product (GDP) positively influences financial profitability, underlining the role of economic growth in banking performance. Thus, policymakers should adopt prudent credit management to minimize negative impacts and ensure financial stability.