What type of study is this?

This is a Quantitative Study study.

September 17, 2025

Determinants of credit growth and its impact on banking efficiency: An analytical study of a sample of commercial banks listed on the Iraq Stock Exchange from 2005 to 2023

Key Points

Credit growth significantly affects banking efficiency, especially during economic instability.
Average banking efficiency in the study was 0.41, indicating considerable underperformance across commercial banks.
Data Envelopment Analysis revealed substantial variations in efficiency scores among banks over the study period.
External factors like inflation and policy rates played a critical role in shaping bank efficiency during the economic fluctuations.

Abstract

This study examines how internal and external determinants of credit growth affect the efficiency of commercial banks listed on the Iraq Stock Exchange between 2005 and 2023. Specifically, it examines the impact of loan quality, capital adequacy, bank size, loan growth, interest rates, inflation, and exchange rates on shaping banking performance. Using Data Envelopment Analysis (DEA), the study finds substantial variation in efficiency across banks and over time, with an overall sample average of 0.41, reflecting persistent underperformance relative to the efficiency frontier. Some banks, such as those in the Middle East, Al Ahli, and Credit Bank, periodically achieved full efficiency scores (1.0), particularly in 2005, 2007, 2012, 2013, and 2023. Others, including Sumer and Mosul, frequently operated at near-zero efficiency levels. Efficiency fluctuated sharply during years of heightened economic and political instability, with the period from 2018 to 2021 marking the weakest average performance, consistent with low or zero scores for multiple banks. External determinants also influenced efficiency: the sharp rise in inflation (37–53%) and high policy rates (up to 20%) in the mid-2000s coincided with wide dispersion in efficiency, while later stability in interest and inflation (2010–2015) corresponded to relatively higher average performance. Exchange rate shocks and inflationary pressures in 2020–2022, alongside the COVID-19 pandemic and geopolitical tensions, were associated with renewed declines in efficiency to below 0.30. The novelty of this study lies in its joint assessment of the roles of both internal banking practices and external macroeconomic shocks in a fragile, resource-dependent economy. By providing evidence from Iraq, the study contributes to the global debate on bank efficiency, showing how crisis conditions and institutional fragility amplify inefficiency and offering comparative lessons for other emerging and conflict-affected economies.

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