CHAPTER ONE INTRODUCTION

CHAPTER 1
1. INTRODUCTION
There has been large scale growth in Islamic finance and banking in Muslim countries around the world and especially in Pakistan, during the last twenty years. There main objective has been the delivery of social and economic development through financial services in line with Islamic teachings.This study looks into the degree of satisfaction of Pakistani customers to measure the level of success achieved by Islamic anks. Islamic banks have grown dramatically in Pakistan over the years.This growth is influenced by factors including the introduction of broad macro economic and structural reforms in Islamic banking, the liberali!ation of capital movements, privati!ation, the global integration of financial market and the introduction of innovative and new Islamic products. Islamic finance is now reaching a new level of sophistication. "owever,it is the customer#s satisfaction that can affect the performance of a bank and could be a major tool for the judgement of the success. (Jarhi, Mabid Ali, Khurshid Ahmed (1 !1". Islamic banking has come a long way in a relatively short time and has captured a significant market share from its conventional rivals. $lthough most of the countries have different Islamic background but they are the major players for revolutionised Islamic financial institutions. The Islamic anking concept began in Pakistan in the early 1%&', where the economists were very keen on the ideology of Islamic banking. Pakistan was the first country to go through full Islamic financial system. The development of full Islamic financial system was Pakistan, Iran and (udan. The customers of Islamic banks in Pakistan have mi)ed views about the success and services provided due to a number of reasons e.g. after twenty years the picture changed when leaders reali!ed that Pakistan inherent by ritish *inancial system that should not be changed. Pakistan was trying to change too +uickly. power of ut unfortunately it was under the ritish legacy, without its independence and freedom. The first phase of

economic reform tooks place in 1%,% when !akat was first deducted from different account holders at a certain percentage. This method was not effective, because it is not

Islamic that .akat is distributed through banks. $nother objection is that , it is debateable whether the money deducted goes to deserving people, and whether it is effective or not for alleviating poverty . (A##ar$al a%d &'usa( ()**1"+Ka,aria% 1 a%d Ra- )**)".

Pakistan was the first country that uses "isbah, which controls the market which provides municipal services and settles disputes. In the second phase of Islamic finance, the Pakistan /overnment outlawed interest and introduced brotherly and godly ways for generating profit. Ironically, foreign banking transaction is still working in western systems. The government was trapped due to its beliefs and culture. This problem further increased when IM* pressured Pakistan to privati!e its banking system. 0ue to a system that lacked planning, these matters got worse in 1%%-, when the *ederal (hariah court declared that interest based banking is not Islamic and would be banned. *inally, in 1%%1, a decision took place to eliminate riba from its banking system. The Pakistan anking model teaches us that, interest free banking employ P2( as a source of earning , but it is not functional that %'3 of its transactions are locked by its markup. In this way it raises +uestion that the Islamic anking system created many problems, and only businessmen took new benefits from this model. Therefore this e)periment did not achieve its result. (Ahmed, .., M. I/bal a%d M. 0. Kha% ()**1". Since 1971, Islamic banks have continued to grow in si!e and number.The main mission of these banks has been the achievement of social and economic development through the delivery of financial services in line with the principles and teachings of Islam. To achieve their mission, it is imperative for Islamic banks to continue to study the changing behaviour, attitude and perceptions of their customers, especially in the retail sector which constitutes the major portion of the banking business. 4verlooking differences between cultures has recently been shown to limit the ability of service multinationals to e)pand their activities internationally (K'#u1 a%d 2i%#h, 1 !!+ 3i a%d 4uisi%#er, 1 1, 1 )" . Furer et al. (2002) argue that the importance and perception of service +uality are highly dependent on customers# values and beliefs that might change from one culture to another. This dependence has led to increased concern about the relationship between national culture and service +uality. Winsted (1997) developed behavioural5based service encounter dimensions for the 6($ and 7apan and identified cultural differences between 8estern and $sian customers.

Customer satisfaction is the feeling or attitude of a consumer toward a product:service after it has been used (2'l'm'%, 1 (Dis8e%sa, 1 9". 5+ 6ells a%d Pre%s7-, 1 5;. $ satisfied consumer will repeat the purchase of the product and convey positive messages about it to others y contrast, dissatisfied consumers are more likely to switch to an alternative product: service the ne)t time he:she recogni!es the same need. <ot only this, but also his:her dissatisfaction will be reflected in a negative word of mouth which might have a serious damaging effect on the business (4ulled#e, 1 5".

anking is one of those industries in which consumer satisfaction has attracted the attention of many researchers =for e)ample, A%ders'% e1 al., 1 1 1 1 <+ ;re%hard1 e1 al., 1 5+ 6hi1e, 1 =+ Dis8e%sa, 1 9+ H'llida-,1 :+ ;edall a%d P'$er, 5+ 6ells a%d Pre%s7-,

=". 4ne of the major reasons is that a fiercer level of competition is =".

becoming the most influential factor in determining the competitiveness of banks (;ar1ell, :+ Har'% e1 al., 1

Customer satisfaction is becoming so important to the e)tent that some banks consider it as a chief element in their marketing strategies. The term >aftermarketing> has been widely used to mean focusing attention and efforts on current customers in order to ma)imi!e their satisfaction to secure their retention (>a?ra, 1 <".The issue of customer retention has ank =6?; conducted been the major concern of many banks. *or e)ample, 2loyds

research to identify the process leading from customer satisfaction to account closure and to e)plore the determinant factors of dissatisfaction. The findings of the study helped 2loyds to design and implement a new customer retention process (6a1erh'use a%d M'r#a%, 1 =". 2ike 2loyds ank, the <ational ank of Middlebury =6($; also developed a +uality service program based on customer retention through service +uality. (imilarly, the @oyal ank of (cotland uses customer satisfaction to help plot the course toward its vision for the future. The bank is concerned about profitable customer behavior in terms of the remaining with the bank, referring the bank to friends, and repurchasing from the bankA (IJRDM, 1 <b".

In this chapter the researcher provides a clear definition regarding the issues that should be investigated in this study for achieved its aims and objectives. This study is about Bcustomer awareness and satisfaction in Islamic achieve its aims through the following objectives. C anking in Pakistan#. This research

Measuring the degree of customer satisfaction in Islamic anking in Pakistan. Investigating the reasons that why customers deals with Islamic Measuring the customer awareness and anking products:services. @easons for dealing with both types of anks anks.

perceptions for use of different Islamic

$s it can be seen above, the reseacher aims to attempt to provide the assessment of degree of customer satisfaction towards Pakistan Islamic anking . Therefore, this study is designed to identify the profile and banking habits of Islamic banking customers in Pakistan as well as their awareness, usage, perceived importance and degree of satisfaction with the current products and services offered by them in Islamic banking sector.

&

CHAPTER T6O ;ACK4ROUND

CHAPTER )
).1 ;ACK4ROUND PAKI2TAN
The Islami!ation of the banking and financial system of Pakistan was started in 1%,,5,1. Pakistan was among three countries in the world which had been trying to implement interest free banking at a comprehensive:national level. ut as it was a mammoth task, the switchover plan was implemented in phases. The Islami!ation measures included the elimination of interest from the operations of speciali!ed financial institutions including " *E, IEP and <IT in 7uly 1%,% and that of the commercial banks during 7anuary 1%11 to 7une 1%1&. The legal framework of PakistanFs financial and corporate system was amended on 7une -D, 1%1' to permit issuance of a new interest5free instrument of corporate financing named Participation Term Eertificate =PTE;. $n 4rdinance was announced to allow the establishment of Mudaraba companies and floatation of Mudaraba certificates for raising risk based capital. $mendments were also made in the 4rdinance, 1%D- =The anking Eompanies E4, 1%D-; and related laws to include provision of bank finance

O0

I23AMIC

;ANKIN4

IN

through P2(, mark5up in prices, leasing and hire purchase. (Abbas Mira7h'r, 1 !9+ 0rederi@7 3, P-'r 1 !<". (eparate Interest5free counters started operating in all the nationali!ed commercial banks, and one foreign bank = ank of 4man; on 7anuary 1, 1%11 to mobili!e deposits on profit and loss sharing basis. @egarding investment of these funds, bankers were instructed to provide financial accommodation for /overnment commodity operations on the basis of sale on deferred payment with a mark5up on purchase price. G)port bills were to be accommodated on e)change rate differential basis. In March, 1%11 financing of import and inland bills and that of the then @ice G)port Eorporation of Pakistan, Eotton G)port Eorporation and the Trading Eorporation of Pakistan were shifted to mark5up basis. (imultaneously, necessary amendments were made in the related laws permitting the (tate ank to provide finance against Participation Term Eertificates and also e)tend advances against promissory notes supported by PTEs and Mudaraba Eertificates. *rom 7uly 1, 1%1-

banks were allowed to provide finance for meeting the working capital needs of trade and industry on a selective basis under the techni+ue of Musharaka. (21 3'uis, 1 !:". $s from $pril 1, 1%1& all finances to all entities, including individuals, began to be made in one of the specified interest5free modes. *rom 7uly 1, 1%1&, all commercial banking in Pak @upees was made interest free. *rom that date, no bank in Pakistan was allowed to accept any interest5bearing deposits and all e)isting deposits in a bank were treated to be on the basis of profit and loss sharing. 0eposits in current accounts continued to be accepted but no interest or share in profit or loss was allowed to these accounts. "owever, foreign currency deposits in Pakistan and on5lending of foreign loans continued as before. The (tate ank of Pakistan had specified 1- modes of non5interest financing classified in three broad categories. "owever, in any particular case, the mode of financing to be adopted was left to the mutual option of the banks and their clients. The procedure adopted by banks in Pakistan since 7uly 1 1%1&, based largely on Bmark5up# techni+ue with or without Bbuy5back arrangement#, was, however, declared un5Islamic by the *ederal (hariat Eourt =*(E; in <ovember 1%%1. "owever, appeals were made in the (hariat $ppellate ench =($ ; of the (upreme Eourt of Pakistan. The ($ delivered its judgment on 0ecember -9, 1%%% rejecting the appeals and directing that laws involving interest would cease to have effect finally by 7une 9', -''1. In the judgment, the Eourt concluded that the present financial system had to be subjected to radical changes to bring it into conformity with the (hariah. It also directed the /overnment to set up, within specified time frame, a Eommission for Transformation of the financial system and two Task *orces to plan and implement the process of the transformation. The Eommission for Transformation of *inancial (ystem =ET*(; was constituted in 7anuary -''' in the (tate ank of Pakistan under the Ehairmanship of Mr. I.A. anfi, a former /overnor (tate ank of Pakistan. $ Task *orce was set up in the Ministry of *inance to suggest the ways to eliminate interest from /overnment financial transactions. $nother Task *orce was set up in the Ministry of 2aw to suggest amendments in legal framework to implement the Eourt#s 7udgment. The ET*( constituted a Eommittee for 0evelopment of *inancial Instruments and (tandardi!ed 0ocuments in the (tate ank to prepare model agreements and financial instruments for new system. (Mr I.A. Ha%(i, )***".

The ET*( in its @eport identified a number of prior actions, which were needed to be taken to prepare the ground for transformation of the financial system. It also identified major (hariah compliant modes of financing, their essentials, draft seminal law captioned BIslami!ation of Financial "ransactions #rdinance, 2001$, model agreements for major modes of financing, and guidelines for conversion of products and services of banks and financial institutions. The Eommission also dealt with major products of banks and financial institutions, both for assets and liabilities side, e.g letters of credit or guarantee, bills of e)change, term finance certificates =T*Es;, (tate ankFs @efinance (chemes, Eredit Eards, Interbank transactions, underwriting, foreign currency forward cover and various kinds of bank accounts. The Eommission observed that all deposits, e)cept current accounts, would be accepted on Mudaraba principle. Eurrent accounts would not carry any return and the banks would be at liberty to levy service charge as a fee for their handling. The Eommission also approved the concept of 0aily Product and 8eightage (ystem for distribution of profit among various kinds of liabilities:deposits. (H'us1'% 1 2 Kha%, 1 ". , M'shsi%

$ccording to the Eommission, prior:preparatory works for introduction of (hariah compliant financial system briefly included creating legal infrastructure conducive for working of Islamic financial system, launching a massive education and training program for bankers and their clients and an effective campaign through media for the general public to create awareness about the Islamic financial system. The *inance Minister of Pakistan in his budget speech for the *inancial year -''declared the followingH The /overnment is committed to eliminate @iba and promote Islamic banking in the country. *or this purpose a number of steps are under way which areH 1. $ legal framework is designed to encourage practice of Islamic banking by banks and financial institutions as subsidiary operations of their main operationsI -. Eonsultations and e)changes are undertaken with brother Islamic countries and renowned institutions of Islamic learning such as middle eastern countries and $l5 $!har 6niversity of Ggypt, to learn more about their e)periences and practicesI

9. $mendments in " *E $ct are being made in line with the directive of the (upreme Eourt. 8ith these changes, " *E would be fully (hariah compliant institution, which will play an effective role both in promotion of Islamic financing method but also in the development of the important housing sectorI C. (hariah compliant modes of financing like Musharaka and Mudaraba will be encouraged so that familiarity and use of such products is enhanced and their adoption at a wider scale made possible.It is government#s intention to promote Islamic banking in the country while keeping in view its linkages with the global economy and e)isting commitments to local and foreign investorsA. The "ouse uilding *inance Eorporation had shifted its rent sharing operations to interest based system in 1%1%. The Task *orce of the M:4 2aw proposed amendments in the " *E $ct to make it (hariah Eompliant. "aving vetted by the ET*(, the amended law has been promulgated by the /overnment. $ccordingly, the " *E launched in -''1 $saan /har (cheme in the light of amended 4rdinance based on the 0iminishing, Musharakah concept. $ Eommittee was constituted in the Institute of C%artered Accountants, &a'istan (ICA&), where in the S(& was also represented, for development of accounting and auditing standards for Islamic modes of financing. The Eommittee reviewed the standards prepared by the ahrain based. Accountin) and Auditin) #r)anisation for Islamic Financial Institutions (AA#IFI) with a view to adapt them to our circumstances and if considered necessary, to propose new accounting standards. (.ubair I/bal )***, I/bal .aidi )**1". It was decided in (eptember -''1 that the shift to an interest free economy would be made in a gradual and phased manner and without causing any disruptions. It was also agreed that the (tate ank of Pakistan would consider. 1. (etting up subsidiaries by the commercial banks for the purpose of conducting (hariah compliant transactionsI -. (pecifying branches by the commercial banks e)clusively dealing in Islamic products.

1'

9. (etting up new full5fledged commercial banks to carry out e)clusively banking business based on proposed Islamic products. $ccordingly, the (tate ank issued detailed criteria in 0ecember -''1 for establishment of full5fledged Islamic commercial banks in the private sector. $l Mee!an Investment Mee!an ank received the first Islamic commercial banking license from ( P in 7anuary -''- and the ank 2imited =M 2; commenced full fledged commercial banking operation from March -', -''-. *urther, all formalities relating to the ac+uisition of (ociete /enerale, Pakistan by the M 2 were completed, and by 7une, -''- it had a network of & branches all over the country, three in ?arachi, one in Islamabad and one in 2ahore. The M 2 now maintains a long term rating of $J and short term rating of $1J, assessed by 7E@ KI( Eredit @ating Eo 2td, signifying a consistent satisfactory performance. (>ahe Pe1r'ssia%, )**1, 2'hrab ;ehdad )**1;. The /overnment as also the (tate ank is mainly concerned with stability and efficiency of the banking system and safeguarding the interests, particularly, of small depositors. 8ith this concern in mind it has been decided to operate Islamic banking side by side with traditional banking. The approach is to institute best practice legal, regulatory and accounting frameworks to support Islamic banks and investors alike. The year -''-5-''9 witnessed strengthening measures taken in the areas of banking, non5bank financial companies and the capital markets.

11

CHAPTER THREE 3ITERATURE RE>IE6

1-

CHAPTER :
:. 3ITERATURE RE>IE6
:.1 CUSTOMER SATISFACTION
The banking industry has become increasingly integrated in recent years. 2iberalisation and deregulation of the financial sector, coupled with rapid technological advancement and improved communication systems, have contributed to the integration process. $s a result, banks are now faced with very high and intense competition. (tudies by &arasuraman et. al (19*+), and ,eit%mal et. al (1990), noted that the key strategy for the success and survival of any business institution is the deliverance of +uality services to customers. $ccordingly, -e.man and Co.lin) (199/) believes that e)cellent service +uality is vital to business. profitability and survival. In this sense, Islamic banks are of no e)ception. To satisfy customers, banks use various tools, ranging from reengineering all services to focusing on some specific services (M'1le-, 1 1 =". 4ne of the areas which is growing and believed to have a significant impact on customer satisfaction is telemarketing (2i'%, =". W%ite (1990) has e)amined the importance of telemarketing in satisfying customers and concluded that Ltelephone banking could become a key aspect of customer satisfactionA. In (ingapore banks are continually involved in improving the core technology that makes self5service banking products possible in order to achieve better marketing, customer satisfaction and retention (Kass, 1 )". The Eo5operative ank in the 6? has applied another strategy to satisfy its customers. The bank encouraged customers to communicate directly with its account management center, rather than contacting the branches, for any problem or complaint they might have. This strategy has helped Eo5 operative bank to gain one of the highest customer satisfaction ratings (IJRDM, 1 <a".

19

The above discussion highlights the importance of customer satisfaction which is thought to be the cornerstone in constructing strategies of banks. In this respect, it is essential for a present5day bank to switch from managing means to managing customers in order to satisfy them with the whole services they offer. Therefore, it is important for banks to have a system by which consumer satisfaction is continuously measured (Cha7ra?ar1- e1 al., 1 5+ Chi1$''d, 1 5+ M'rrall, 1 5+ N'e, 1 5+ R'ma%' a%d 2a%(illi8', 1 5".

$lthough Islamic banks# principal activities are based on Islamic 2aw =(hari#ah;, their banking businesses are no different from other banks or financial institutions. Thus, Islamic banks face competition not only from conventional banks, but from new market entrants as well. 4ne of the means for Islamic banks to cope with such strong competition is by improving the ways products and services are offered to their customers. It is for this reason that #t%man and #.en (2001a) concluded that there e)ists a need for Islamic banks to adopt service +uality program. They further argued that service +uality can be a differentiating factor for Islamic banks to boost up their market shares and profit position.

9.1.1 IM&#1"A-C2 #F S213IC2 45A6I"7

The importance of service +uality and its role as the key factor in differentiating service products and gaining competitive advantage have been documented in a number of studies =see for e)ample studies by Parasurama% e1. al, 1 !<+ ;'l1'% a%d Dre$, 1 Cr'%i% a%d Ta-l'r, 1 scant. (ervice +uality has been viewed as a significant issue in the banking industry by Stafford (1990).(ince financial services are generally undifferentiated products, it becomes imperative for banks to strive for improved service +uality if they want to distinguish themselves from the competition. Positive relationship between high levels of service +uality and improved financial performance has been established by 1ot% and 3an der 3elde (1991) and (ennet (1992). (imilarly, (o.en and ed)es(1999) documented that improvement in +uality of service is related to e)pansion of market share. 1+ a%d )". Gven though there is an abundant of research investigating

service +uality in the service industries, studies on this issue as related to Islamic banks are

1C

In the current marketing literature, much attention on the issue of service +uality as related to customers# attitudes towards services has focused on the relationship between customer e)pectations of a service and their perceptions of the +uality of provision.This relationship known as perceived service +uality was first introduced by 8ronroos (19*2). /ronroos suggested that the perceived +uality of a given service is the result of an evaluation process since consumer makes comparison between the services they e)pect with perceptions of the services they receive. "ence, they concluded that the +uality of service is dependent on two variablesH e)pected service and perceived service. &arasuraman et. Al (19*+) considered that a customer#s assessment of overall service +uality depends on the gap between the e)pected and perceived service. Thus, the key to managing perceived service +uality is to minimi!e this gap. ,eit%aml (19**) defined perceived service +uality as the customers# assessment of the overall e)cellence of the service. (olton and 9re. (1991) described service +uality as a form of attitude that results from the comparison of e)pectations with performance. (err: et. al (1990) pointed out that since customers are the Lsole judge of service +ualityA, an organisation can build strong reputation for +uality service when it can constantly meet customer service e)pectations.

9.1.- A&&1#AC 2S #F S213IC2 45A6I"7

$pproaches to the measurement of service +uality have typically been either a simple comparison of mean scores, e)tensive and detailed statistical model or more recently market research +uestionnaire. The current measurement of perceived service +uality using the latter approach can be traced to the research of &arasuraman et. al (19*+). 9ont%u and 7oo (199*) used ofstede$s dimensions of culture and the dimensions of

service +uality from the (G@KM6$2 scale to develop and test hypotheses relating the five dimensions of culture with both a measure of the overall service +uality e)pectation and the five service +uality dimensions. $s an e)tension of the work of 0onthu and 7oo, Furer et al. (2002) mapped the relationship between the five dimensions of (G@KM6$2 and the five dimensions of culture developed by fre+uent or infre+uent service situations. ofstede (1991). Their study also considered contingency variables such as powerful or weak customers, male or female employees, and

1&

They also developed a Eultural (ervice Muality Inde) =E(MI; that evaluated the relative importance of each (G@KM6$2 dimension as a function of the five cultural dimensions and that could be used to segment multicultural markets and allocate resources across cultural segments. The (G@KM6$2 scale developed by (Parasurama% e1 al., 1 !<, 1 !!, 1 ;'ller, 1 )+ Carma%, 1 1" has been )+

widely utili!ed in many banking institutions and for academics purpose (;aba7us a%d *+ Cr'm81'% a%d Ma@7a-, 1 ! + Cr'%i% a%d Ta-l'r, 1 =". 6ebs1er, 1 ! + 6''dside e1 al., 1 ! ". The popularity of (G@KM6$2 is due to a number of advantages that it has been recogni!ed for =;u11le, 1

*or assessing different dimension of service +uality (G@KM6$2 scale is acepted as standard. (G@KM6$2 scale shows a valid number of service +uality. This scale measurement is base on reliablity, means different reader interpret the +uestion similarity. This model got limited number of items which is easily by customers and employees +uickly. This scale procedure based on standardi!ed analysis procedure with addition of interpretation of result.

(G@KM6$2 model also consist of five dimensions. (Parasurama% e1 al., 1 !<, 1 !!, 1 1". 1. 1elia;ilit:. The first dimension has the ability to perform the service dependably and accurately. -. 1es<onsi=eness. This performance refers to willingness for helping customer and provide prompt services. 9. "an)i;les. The third dimension referes to the pshysical facilities, e+uipment and appearence of personnel. C. Assurance. The fourth dimension releates with employees knowledge, courtesy and ability to convey trust and confidence.

1D

&. 2m<at%:. The last dimension refer to the level of caring and individual attention provide customers. Gvaluation of service +uality become difficult due to three characteristics that are inherent in services , intangibility, heterogeneity and inseparability (;err- a%d Parasurama%, 1 1". "owever, &arasuraman et all (19*+) proposed a framework consisting of ten determinants for service +uality such as reliability, access, understanding the customer, responsiveness, competence, courtesy, communication, credibility, security and tangible consideration. Mal%otra et al, (1990) used these dimensions for the evaluation of service +uality in developing countries. These service +uality dimension related to certain economic factors and socio5cultural factors. The service +uality dimension are of reliability, access and understanding the customer are relevant to conventional economic development aspects such as levels of affluence, technology, education, competition and communication infrastructure. The respon siveness dimension is attributed to socio cultural influences concerning the value of time. (H'(s1ede 1 !*".

:.) DIMENSIONS OF SERVICE QUALITY

The service +uality dimensions are of competence, courtesy, communication and ofstede$s cultural dimensionH power distance

credibility correlate significantly with two

=the e)tent to which a society honors the une+ual distribution of power in institutions and organi!ations;, and individualism =the e)tent to which a society has a tightly social framework;. (mall power distance and individualism were found together with greater national wealth, whereas high power distance and collectivism were found to be associated low national wealth. *inallly service +uality dimensions of security and tangibility are linked with Maslo.$s 1970 hierachy along which individual needs are arrangedH physiological needs, safety needs, Nbelongings and love, esteem needs, and self actuali!ation needs. 2ower level needs are said for higher level needs and to direct behaviour they are satisfied. 8hile individual in developing countries should try to fully satisfy the lower level needs such as =physiological and safety needs;, individuals in developed countries have been far away for fulfilling the criteria of those needs and addressing higher order needs and emotions (Ki%# a%d Malh'1ra, )**=". 8e briefly discuss the dimensions of service +uality. 1,

9.-.1 126IA(I6I"7
The ability to perform the service dependably and accurately is known as reliability. $ccording to (err: et al (1990), service reliability is the service >core? to more customer and managers should use every oppurtunity to bulid >do it ri)%t firstA attitude. Managers are encouraged to include reliability issues in their mission statements, set reliability standards, teach the importance of reliability in training programmes, appoint team to study for improving reliability, measures error rate and reward error free services. The reliability and consistency with which service is delivered can take into two ways. The first way is that, emphasi!ing the technological superiority and dependability of the process by which the service is produced a high tech approach. 8hile technological drivers such as advance in telecommunication, satellite, digital and web technology increases the tradability of services (;ra#a, 1 economy. The second thing is that, the consistent and dependable performance of service +uality re+uired high development. (ocial interaction and personnel connectivity based on good judgmnet , especially taken decision in applying service +uality in developing countries (2hem$elll e1 all, 1 !". 8hile in developing countries for making the process to adopt high technological changes and high touch approach is suitable for customers are more familiar with human services also well aware of weak technological infrastructure in their countries (28ee@e a%d 2riAum8a, )**)". (pecifically, reliability of service +uality can be better established if we give attention on technology =high tech; in undeveloped countries and aslo pay attention on personnel =high touch; in developing countries. es'ett et al (1990) diffrentiate between Lmerely goodsA services and LbreakthroughA service. The Lmerely goodA service focused on the acceptance of defect free services due to cost consideration. 8hile LbreakthroughA service focused on e)isting customer by setting new standards for consistenly meeting, needs and customer e)pectattions. These defect free service can be implemented by using human, technical and finacial resources and make more accessiable to developed countries. In general <" and e)panding the globali!ation of services (3'?el'@7, 1 ", there still remain a great gap in technological sector in developed and developing countries

11

+uality service in developing countries pay more attention to Lmerely goodsA while in contrast other developing countries put more attentions towards LbreakthroughA services. *or providing reliable service +uality it needs continuous improvent (;arr- a%d Parasurama%, 1 1". In developing countries firm face continuous competition. The argument by ,eit%aml et all (199@) is that accessibility of alternative service providers depends upon e)pectation levels. $nother argument is that firms face percieve competitive alternatives, the tolerance !one become narrower and level of ade+uate e)pectation become higher. *or managing customer higher e)paectation and lower tolerance, firms adopt techni+ues for continuous improvement in service +uality. (pecially, it is neccessary for developing countries to utilise their resources for formulating and implementing strategies concerning customer e)pectation, customer evaluation of the service process and customer retention. Eustomer in developing countries have lower +uality e)pectation as compared to other developing countries due to not improvement in service +uality. In developed countries there is a need for continuous improving +uality standard . "owever, firms in developing countries donot focus customer centrality, that why service +uality is not improved. (6al7er a%d ;a7er ()***".

9.-.1=a;H ACC2SS
(ince production and consumption are two important factors for service +uality that cannot be seperated. 0ifferent researcher established between national wealth and the degree of individualism maintained in a society. (H'(s1ede, 1 1". $nother argument is that national wealth increases , member of society and access those resources that should be more independent. These resources include both, non personal and personal means.The highly advanced and reliable communication infrastructure in developing countries and in this way create customer:supplier connection. 4ther possible alternatives non personal contact modes such as telephone, facimile, electronic mail and tele) , due to these it is easy to contact with customer and not time consuming as well. 6nfortunately, majority of developing are lack of unreliable communication network, it is necessary that for improving service +uality the direct personal contact is relative importance between customer and the service supplier. "ence, we can say that non personal contact =e.g. telephone and electronic; is relatively more important in developed countries, whereas

1%

personal contact is important for establishing and accessibility in developed countries. (21ee%sma e1 al. ()***".

9.-.1=b; 5-921S"A-9I-8 " 2 C5S"#M21S

*or service +uality in business, strong customer releationship is very important due to their lack of focus and objective measure for evaluation service +uality. (C,e8iel, 1 *". There are three basic level for releationship marketing. The first level based on financial incentive, such as price discount, and retain old customerI the second level is about firms provided financial and social benefit ,and learned about the wants and needs of customers for releationshipI third level is focus on releationship, and in addition include structural and psychological bond with social and financial benefits. (;err- a%d Parasurama%, 1 4$i%%er e1 al 1 1+ !". The other argument is given by Mal%otra and A)ar.al (2002) that

by adding strategy dimensions in customer releationship and value added to benefits provided for both relationship partner in strategic alliances. *or gaining higher level lof releationship marketing is implemented in developing countries do not reach at the high level. ecause many customer have to gave information in brief for benefit they got from services.Mass customi!ation in developing economies is +uite low. "owever we can say that, firms in developing countries keep up their marketing edge and competency, also give financial incentive and cut their prices as well , therfore in this they build strong customer relationship. 4n the other hand in less developing countries , they do not provide incentive and do not cut their prices as well. In developing countries all effort should be made, but not concerning individual person life, but in developing countries they focus to make their product for understanding the customer uses and benefits from services. (Pi%e, 1 2he1h e1 al. )***". :+

:.: RE2PON2I>ENE22
The second important determinants of service +uality is responsiveness, it means that performance refers to willingness for helping customer and provide prompt services. Gmployer should be able to gave +uick response to in+uiries and complaints of customers. Problem solving and +uick response is very important part of service +uality (Har1 e1 al, 1 *+ Dabh'l7ar e1 al, 1 5+ 2$a%s'% a%d Kelle-, )**1" . Eustomer of developing countries place a higher value on time as compared to those of developing countries. (3a%e -'

a%d Dis1e(a%', 1 !!". The marketing literature shows that there is a relationship between time scarcity and consumers needs for good and services. 0eveloping countries percieve time is money and try to use it efficiently with a focus on present. 4n the other in less developing countries they focus on past. Their goal is to achieve completion without scheduling. (o we can say that in developing countries, timely response to customer established very well, but on the other hand in less developing countries they focus on decision convenience, access convenience, transaction convenience and benefit convenience. Therefore less developing countries donot response +uick to customers, and in this way they have lack of service +uality. (;err- e1 al, )**)".

9.9.1 C#M&2"2-C2
If the firm is competence in service and it can easily focus the customer centrality. In this way they achieve their goals. /ood communication of service +uality can be achieved in developing countries by focus the competence of the organi!ation for services. $ccording to ofstede (1991), developing countries characteri!ed by collectivist culture. In these collectivist societies the individual person skill is considered very important in service organi!ation as a whole. This is confirmed by ofstede, 1991, who state that L$n employer never hires just a person, but rather a person who belongs to an in groupA. G)pertise and skill reflected in organi!ation. 4ther argument is that, competence and trust in developed individual societies and focused on the individual reliability and dependability. (C'%$aa%d 2$i(1, )***". 4ther thing is that in less developing countries power is given to individual people and they misuse it. Gmployees in different level of organi!ation use une+ual roles, power and skills. 6nfortunately high mangement is not in the accessible to customers. Therefore customer deal with ordinary employee in organi!ation as a whole. In developing countries , believing that people are e+ually important and have the same right and oppurtunities in life , but unfornutanetly in less developing countries they donot care about e+ual oppurtunities for their convenience. The focus in on individual than on roles for interaction. In developed markets competence and achievement of individual employees is relatively importance. 8e stated that in developed countries service firms focus on the individual employee competency, in developing countries firm competency can be centrali!ed by organi!ation. (6i%s1ed, 1 9a, b". -1

9.9.- C#51"2S7
Eustomer satisfaction is largely dependent upon interaction of service provider, appearence and behaviour of employees and working enviornment. Eustomer do not diffferniate between the services and the service provider. *or providing service +uality, it is necessary that firms care the value and norms of customers. The difference between the marketing services in developed vs developing economies is due to courtesy. In individualist culture, ther gave more importance to privacy, freedom and e)perience. (H'(s1ede, 1 by the age group (Tra%dis, 1 (;re11 a%d O7umura, 1 !!". 1". 4n the other hand the important of collectivisit is that they included the social norms and beliefs <". In developed countries , couurteous service and respect individual privacy and rights, whereas in developing countries they consider social norms.

9.9.9 C#MM5-ICA"I#(ervice companies encourage word of mouth communication. In many situations customer seek the opinions of other people for selecting a bank or car repair shop. 4n the other hand, detailed information is provided for benefits of services to the customer in developed countries due their level of education , thinking are suited for e)plaining the benefit. In short, they have given a choices for purchasing. Eustomer in developing countries. (Pe11- e1 al, 1 !:", other factors remain constant. In developing countries where individualistic culture, communications are often not in practice (Ma11ila, 1 ". 4n the other hand customer in developing countries, instead to provide good information, often happening to provide poor information to customer which restrict the complelete information of services using central processing. <on business related informal communications =or small talks; and +uality of interaction form the basis of mutual understanding and trust (Harris a%d M'ra%, 1 *+ Riddle, 1 )+ 6i%s1ed 1 9a,b" . Eonsumer collect their evidence from the e)perience of satisfied customer, brand and manufacture#s image and their releationship with people, family members , social group and social class. 8e stated that communication in developed countries should provide detailed and comple) information, however, in developing communication is on basic level. "owever communication in developed countries is for individual purpose, and in

--

developing countries communication should accepted by society. (H'(s1ede, 1 !*+ De M''iA, 1 !".

9.9.C C129I(I6I"7
It is difficult for customer to evaluate the service +uality due to intangible nature of services and due to bulk consumption and production as well. The trustworthiness, believability, and credibility of service supplier are very important for attracting customers. @ecently corporate credibility play very important role for changing habits and purchasing wants of customers. (3a((er1- e1 al, )**)+ 4'ldsmi1h e1 al, )***". Eorporate credibility form a positive corporate reputation. "owever, credibility issue is different according to country level of economic development. (4re#'r-, 1 1+ 0'mbru%, 1 5, 0urrer e1 al, )***". 0ue to self confidence and self responsibility, customer demanded that service provider efficient and task oriented, therfore, in developed countries, they use statistical data and performance of the company through the years for achieving customers. 4n the other hand developing countries are based on collective societies where the attention is placed due to organi!ational background, e)pertise, order, duty and security in the society (H'(s1ede, 1 !*". 4ther argument is that, in developing countries due to large power distance, weak customers with little self confidence are dependent upon the service provider. Therfeore, service supplier in developing country is based on tradition and importance of society , credibility and trustworthness of the firm. 8e stated that, in developed countries credibility is purely based on standing performance, but in developing countries they based on old traditions (D'%1hu a%d &'', 1 !".

9.9.& S2C51I"7
There is low reliability in developing countries, as a result they need high concern of freedom, danger, risk or doubt include physical , financial as well as emotional security. (Parasurama% e1 al, 1 !<". There are three types of needs such as need for security =physical and financial;, need for justice and need for self esteem. Eustomer need stability and predictability of their safety and financial matter as well. There is also need of e+ually power distribution, e+ual justice and finally there also a need for self5esteem, this is the key for customer service +uality (2@h%eider a%d ;'$e%, 1 -9 ".

$nother argument is that in developing countries consumer are at low order need =security;, whereas in developed countries consumer are at high order need =self esteem;, therefore lower order need should not fullfilled in developing countries.*or e)ample, a case study of 6( and ?orean retail consumer, found that ?orean respondent gave reliability =security; the highest rating while 6( respondent gave lowest rating. "owever, in developed countries, the stake holder are at emotional level therfore it is a very rare chance for mishandling. Gven if this happen, then management compensate it. $s a result, it is stated that, in developing countries, they gave more importance to emotional security, whereas in developing countries instead of giving emotional security, they gave importance to physical security and other needs. (Masl'$, 1 9*+ Kim a%d Ji%, )**)".

:.= TAN4I;I3IT&
Tangibility means physical evidence services, consisting of physical facilities, appearence of personnel, tools or e+uipments, physical presentation to customer for service +uality (Parasurama% e1 al., 1 !<". In developing countries customer beliefs on word mouth and generally satisfied with acceptable performance and core benefit it promises by the offer. In general, we can say that consumer in developing economies: collectivist culture are highly practice in their choice criteria due to personality factors and in return higher level values, meanings, culture and philosphy of life (Tra%dis, 1 <". The core benefits of services provided to customer can never be subsitute by fancy facilities and tangibles. 4n the other side, customer in developed countries are satisfied when service already offer to them e)tended benefits with their old services. These benefits tend to be more tangibles than the old services. In term of Maslo.s hierachy theory, developing countries , product need is at lower level than developed countries, which are at higher level. Therefore, service supplier in developing countries facing communication problem, for providing service +uality as per person, but a supplier in developed country doing e)tra efforts for adding benefits to their lifestyle and status. "ence in developed countries ther gave great importance to service +uality whereas in developing they gave less importance to service +uality and gave attention towards core services (;i1%er, 1 1 ". )+ 2@hei%der a%d ;'$e%,

-C

$ccording to #t%man and #.en (2001a), (G@KM6$2 has proven to be the most popular instrument for measuring service +uality because it affords technology techni+ues for measuring and managing service +uality. "owever, since the Islamic banking industry operates under different principles and cultures as compared to other service industries, they argued that an additional dimension should be added to the (G@KM6$2 method. Then they developed an instrument called E$@TG@ to measure service +uality in Islamic banking. In addition to the e)isting five dimensions in (G@KM6$2, E$@TG@ incorporates an e)tra dimension which is LEompliance with Islamic 2awA. This dimension includes such items as run on Islamic law and principles, no interest neither paid nor taken on savings and loans, provision of Islamic products and services, provision of free interest loans and provision of profit5sharing products (O1hma%a%d O$e%, )**1a". earing in mind that there e)ists cultural differences between countries, regions, religions or ethnic groups, it is imperative to build additional dimensions for service +uality especially in the Islamic banking industry. oth cultural and religious influences are not defined by the (G@KM6$2 model. Taking this into consideration when adopting service +uality, 4thman and 4wen =-''1a; developed an instrument called E$@TG@ which is based on 9& items. This is the first approach to add and mi) customers# religious beliefs and cultural values with other +uality dimensions. E$@TG@#s si) dimensions were conceptualised as a proposed framework for measuring +uality of services in Islamic banks by O1hma% a%d O$e% ()**1a".The authors defined the si) dimensions as followsH 91A Com<liance , which means the ability to comply with Islamic 2aw and operate under the principles of Islamic banking and economy. 92A Assurance is the knowledge and courtesy of employees and their ability to convey trust and confidence. It also includes verbal and written communication between bank staff and customers 9@A 1elia;ilit: is the ability to performed accuracy. 90A "an)i;les means the appearance of physical facilities, e+uipment, personnel, and communication materials. the promised service, dependability and

-&

9+A 2m<at%: is caring, individualised attention which the Islamic bank provides for its customers. 9/A 1es<onsi=eness is the willingness to help customer and provide prompt services. Islamic banks have been operating for about four decades alongside the traditional banks. 2ike any other traditional commercial banks, they do mobili!e deposits and produce loans. ut their forms of operation, based on Islamic 2aw =(hariah;, are different from the other conventional or commercial banks. Therefore, Islamic banking differs from conventional banking in several ways, such as the prohibition of transactions based on interest rate and the re+uirement that bank#s operations be carried out according to certain procedures through the use of certain financial instruments. The definition of the Islamic bank is a non5interest based financial institution which complies fully with Islamic 2aws, and has creative and progressive financial engineering to offer efficient and competitive banking, investment, trade finance, commercial and real estate financing services. Their are certain reasons that islamic bank need to adopt service +uality which are as follows. *irst, Islamic banks# products and services are perceived as of high +uality by customers because of the concept of doing work in Islam i.e. work is considered in Islam as a type of worship. The &ro<%et (&(5 ) saidH L8hoever finds himself at nightfall tired from his work, /od will forgive his sins.A $lso A;u uraira% said that the &ro<%et (&(5 ) saidH LEharity =sada+ah; is due upon every joint of a person on every day that the sun rises. $dministering justice between two people is an act of charityI and helping a man concerning his riding beast by helping him on to it or lifting his luggage on to it, is an act of charityI a good word is charityI and every step which you take to prayer is charityI and removing that which is harmful from the road is charityA reported by (u'%ari (Ahmed e1 all., )**)". The &ro<%et (&(5 ) also saidH L$llah loves to see one#s job done at the level of it+anA (2abe/, 1 !!". The word it+an means to arrange and dispose of things in a scientific and artistic way in order to obtain the most perfect results or to do something in high +uality way with wisdom. (o a Muslim must please others and make sure that whatever he does, does not introduce unbearable pain or suffering to the human in consideration. (econdly, adapting (M in -D

Islamic banks has become important because of its apparent relationship to costs (Cr'sb-, 1 9 ", profitability (;u,,ell a%d 4ale, 1 !9+ Rus1 a%d .ah'ri7, 1 Rus1, 1 )", customer satisfaction (;'l1'% a%d Dre$, 1 retention =Rei@hheld a%d 2asser, 1 :+ .ah'ri7 a%d :", customer ut 1+ ,se1 al., 1

*", and positive word of mouth. (M is widely

regarded as a driver of corporate marketing and financial performance in banking.

unfortunately this not succeeded in Islamic banking in developing countries. Its better they adopt Earters si) dimension, may in this way they achieve service +uality. (K$'% a%d 3ee, 1 = a%d 6'%# a%d Perr-, 1 1".

CHAPTER 0OUR METHODO3O4&

-,

CHAPTER =
=.METHODO3O4&
=.1 RE2EARCH METHODO3O4IE2
*or improving Islamic anking business, the bank needs information about customer#s ank also needs to find out that whether the

re+uirement when selecting the bank. The

customer is Muslim or <on Muslim and what kind of services is re+uired by each of them. <o such literature is available on Pakistani Islamic banks. The main aim of this research is to find out the degree of customer satisfaction on banking practices for a selected sample of Islamic banking customers in Pakistan. The research is based on the following +uestions. 1esearc% 4uestion 1H 8hat kind of account do customers haveO 1esearc% 4uestion 2H 8hat are the factors that motivate customers to deal with a Islamic ankO 1esearc% 4uestion @H 8hat is the degree of customer satisfaction of Islamic anking in PakistanO 1esearc% 4uestion 0H "ow many customers have awareness and perceptions of different Islamic anking products:servicesO -1

1esearc% 4uestion +H 8hat are the roles of 0emographic factors such as age, gender, education level and annual income, and what are the customer#s e)pectations of their bankO

To find the answers to the above +uestions we measure the service +uality in Islamic banking practice in Pakistan.

C.1.1 452S"I#--AI12 92SI8- A-9 9A"A C#662C"I#$ +uestionnaire was designed in Gnglish, with a set of +uestions that was generated from literature. (Kamal Naser e1 all 1 ". Elosed loop +uestions are used in the study for several reasons. 4ne of them is aimed to test the models used in previous literature. (ome of the information collected by the +uestionnaires was factual, e.g. usage of services, types of bank accounts, demographic etc. The main purpose of +uestionnaires is to initiate communications, hence the +uestionnaires wording itself is very important. $ few things were kept in mind while designing the +uestionnaires. 6tmost importance was given to avoid the negative statements or double barrelled statements, as they can cause a lot of confusion in respondents. The +uestions included very few in numbers in technical terms. Gvery effort was made to decrease the social bias and to avoid leading +uestions. Muestions of personal details were used in the end as per the literature used.

C.1.- 9A"A C#662C"I#$ total of -'' +uestionnaire was posted to different Islamic 3 respondent rate;. anks, which was generated

from the literature. This procedure resulted in a sample of 1'' completed +uestionnaire =&'

-%

The +uestionnaires were posted to different branches of Islamic

anks in Pakistan and

with the agreement of branch managers, they were placed on the cashier counters for the respondents to be filled and returned back to the staff. $ll the completed +uestionnaires were then collected from different branches after a few days. The reason that the respondents were asked to self complete the +uestionnaires was because they are less likely to feel pressurised to give socially desirable answers or to feel embarrassed about the answers they provide. This was very important in this study as respondents were supposed to give their personal details about their bank accounts and use of bank services. In this way, the possibility of interviewer bias shaping the responses was ruled out. This method also provided the respondents with enough time to answer the +uestions re+uired.

C.1.9 9A"A A-A67SIS

The analysis and interpretation of the respondents have been made by using statistical techni+ues and procedures of the (tatistical Package for the (ocial (ciences =(P((;, which is discussed in detail in ne)t chapter &. *or conducting any type of research, methodology is based on well defined research and scientific principles. These methodologies are considered to be based on clear rules and procedures, on which research is based and against which claims for knowledge are evaluated (0ra%7('r1 a%d Na@hmias )***". (o far there is no perfect and universally agreed methodology. This is because, there is still a great debate about the meaning of science (3ee )***". The rules and procedure for research is continuously changing and scientists:researchers look for new methods and techni+ues of observation, persuation, generalisation and analysis. Ba<lan (2001) suggested that for well developed research methodology, it is necessay to understand the product and process of scientific en+uiry. $ methodology deals with a set of rules for reasoning, whereby evaluation of fact can be used to draw an opinion whether it is true or not. "owever a methodology must not fullfill all the other re+uirements, for research procedures. This is also confirmed by 4uinn (2001) who states that > one must re)ard all met%odolo)ies or structures as mere intellectual frame.or' and ;e =er: 9'

cautious a;out t%eir o=eruse in detail? . *udamentally, the real construction is based upon how much determination is involved for methodology, strategy. for adopting proper research

=.)

EPISTEMOLOGICAL FOUNDATION

The term epistemology refers to beliefs about the way in which knowledge is constructed. It is a +uestion whether it is possible to identify and communicate the nature of knowledge as being hard, real and capable of being transmitted in a tangible form. Thus, it does not consider , knowledge as softer, more subjective, spiritual or even transcedental, based on the e)perience and insight of uni+ue and personal nature. The epistemological assumption is that, these situations determine e)treme position and the issue is that whether knowledge is something that can be ac+uired, or something that is based on personal e)perienced (;urrell a%d M'r#a%, )**1". The view is that knowledge is hard, objective and tangible. The researcher suggest that for his research, he could have adopt the role of observer. "owever, to find out whether knowledge is personal, subjective and uni+ue in nature, re+uires the researcher to be completely involved with their subjects.(6ei@7, )**)". Positivism and interpretivism depend upon different assumptions about the nature of knowledge and demand considerably different approaches to research. Positivist epistemology tries to understand a social setting by identifying individual components of e)isting research and then e)plaining the research in terms of construct, and releationship between them. Therefore, this research is based on +ualitative approach (Ca?a-e, )***". The interpretivist approach, however , aims at understanding a phenomenon from the participants and their point of view, who are directly involved with the research. 4nce the epistemological opinion of research has been established and the +uestion that needs to be addressed is clearly identified, it is necessary to decide what kind of data is to be collected and e)amine how it should be analysed. 0ata may be +ualitative, or +uantitative in nature, and often depends upon the epistemology and the way that it is presented by the researcher. *or e)ample, data collected in the form of loosely structured interviews is +ualitative, whereas data collected in the form of e)act measurement of variables may be refered to as +uantitative. *uthermore, (urrell and Mor)an (1999) argue that, +uantitative and +ualitative research methods are opposite to each other, because their 91

real assumption are seen as different. "owever, 8a;le (2000) and 1emn:i Williams(2001) disagree and argue that an alternative research method should be changed gradually at the end.

=.:

THE MIXED APPROACH

@emenyi et al =-''1; argue that positivism and realism are not totally different in terms of their impact on research, and in the generalisation of the findings. oth approaches need to believe that the findings are valid and accepted as a valuable addition to the body of knowledge. 6ltimately, we can say that it is more useful to see the that two approaches as complementary instead of two opposite e)tremes. (Reme%-i e1 al., )**1". The philosphical approach in this research is a balance between positivism and realism. In this way they show how the research +uestion came in to e)istence. 4bjectives identify the empirical evidence undepinning the theoretical prepositions. 1emen:i et al, (2001) suggest that world is essentially non deterministic =in any absolute sense; and repeated positivist research will produce different resultsI a balanced appproach is therefore more LrealisticA.

=.=

VARIOUS METHODOLOGICAL CHOICES

*or conducting any type of research, it is possible to follow three main alternatives, either using the +ualitative or +uantitative approach or a combination of both. "a:ler and (o)dan (2002) e)plain clearly the importance of research methodology. They indicate that research could be conducted by using either =or both; +ualitative methodology or +uantitative methodology depending on the nature of research.

=.<

QUALITATIVE RESEARCH APPROACH

The Mualitative research approach means that it is not possible to assign meaning to a phenomenon =or behaviour; without describing the conte)t and undestanding the position of people who are affected by them. Eonse+uently, a +ualitative investigation is interested in getting new information and understanding the topic (Cress6ell.,1 ". "owever, +ualitative research is not concerned with the measurement and judgment of the research,

9-

but acc+uiring and proving the e)isting research through observation (Cress$ell., 1

".

*or achieving conte)tual understanding direct and in depth knowlege is necessary for research. $s a result, the +ualitative research method releated with face to face contact , verbal data and observation were used . Mualitative data can also be collected in a number of forms, which includes the collection of evidence through field notes and describe observed events. Mualitative data can also be gathered from written documents and archieves, with Miles (1999) identifying that +ualitative data is >ric%, full, %olistic and real .%ose =alidit: is unim<eac%a;le?. (ouma and At'inson$s, (200@) report e)plained that based on +ualitative research the first thing that need to be considered for +ualitative research, to understand human behaviour. The ne)t aspects to cosider are physical setting , roles and values. Therfore the researcher must operate in a setting where these variables e)ist. Mualitative research therefore provides a systematic, empirical strategy for answering +uestion about the people in their own bounded social conte)t with little human interference during the en+uiry. In these situations, people make sense of their e)perience and create reality (Ma- T., )**)". (econdly, some techni+ues associated with e)perimental or +ualitative research often influence the findings of study. The subject#s behaviour is affected and in this way it does not allow the mesurement of variables that the researcher is interested in, this is due to the case that some variables occur that are outside of the researche control. *inally , it is stated that the researcher cannot understand human behaviour without understanding the framework in which subjects interpret, thoughts, feeling and action. $lthough +ualitative research is used with +uantitative strategy, due to some reasons faced in conducting the interviews, combined approach strategy was not considered in this research.

=.5

QUANTITATIVE RESEARCH APPROACH

Muantitative research typically based on logical and linear structure , in which hypothesis take the form of e)pectations about casual links between the concept identified in hypotheses. Thus, the decison is specified on the bases of hypothese that result in acceptance, or rejection for underpinning theoretical proposition. "ence +uantitative research is based upon methodology, procedure and statistical measures of validity. 99

Muantitative research method rely upon the measurement and analysis of statistical data, for e)amining the releationship between one set of data to another. *or producing +uantifable conclusion variables are measured (Cress$ell., 1 who used this objective in a way for adopting following conceptsH ". (rannic' (2000) identifies a number of thinking by using +uantitative research methods and argues those

C.D.1 C#-C2&" A-9 " 2I1 M2C A-ISM F#1 M2AS512M2-"

In this argument, the concept of hypothesis is to be observed, so that they can be measured and therefore either accepted or rejected. In social science research, +uantitative data collection often include with +uestionnaire, as a source for collecting data. "owever, 1emen:e and Willams (2001 <. 1@1) suggest that +uantitative data collection method may sometimes less accurate or less sure as a measurement of what researcher actually want. Thus, e)amining the validity for data i.e internal validity and reliability of research approach is used.

C.D.- CA5SA6I"7
$nother argument is that +uantitative research concerned with only establishing the casual releationship between concepts. Techni+ues used to discover releationship include either e)perimental or cross case analysis. The e)perimental approach is used for assignment control and e)peimental group. 8hereas cross case analysis collect data at a single point in time from multiple sources.

C.D.9 82-21A6ISA"I#This is a process by applying the result of a study that how much researcher in confidence in research. "ow researcher collect data from smaller group or collecting data subset of population. In such a way, the knowledge is gained by total population by studying. y representing sample of organisations, a +uantitative survey approach is used for identify relationship, which are common across organisation , and also provide gernal statement , or theory about the topic being researched.

C.D.C 12&6ICA"I#9C

$rgument is that e)periment performed under this condition should gave same result. Therefore, replication means for checking researcher based and applicability of research findings with other conte)t.

C.D.& I-9I3I95A6ISM
Muantitaive research instrument focus the indiviudual. *or e)ample a survey +uestionnaire is given to individuals for getting their opinions. Their responses are totalled, but the respondent often do not know each other. The decision taking about research methodology for choosing is based upon a combination of certain factors such as limitation on time, money and concern with accuracy and validity. *or find out the nature of project research, there is a need for accurate information which address the set objectives, the research designs involve a +uantitative research method. The +uestionnaire and case study method is applied by the researcher to collect data for meauring service +uality of islamic banking.

=.9

SOURCES OF DATA

@e+uired data and information is needed to conduct research can be either obtained through previous data available from differnt resources rather than the research studied or collected data for the purpose of research. In other words, primary and secondary dat is used respectively, defined by C%urc%ill (2001 <.11+) as follows. >&rimar: dataA Information collected s<ecificall: for t%e <ur<ose of t%e in=esti)ation at %and. Secondar: dataA Information not )at%ered for t%e immediate stud: at %and ;ut from some ot%er <ur<oses?. (uch sources are common in any research process and must be well prepared for and the researcher should aslo make sure that availability and subse+uently the efficiency of data. "owever, methods of data collection in research vary depending upon the type investigation and information needed in certain time limit.

9&

The main methods of data collection areI 1. MuestionnaireI -. InterviewsI 9. 4bservationsI C. Ease (tudyI &. *ocus /roupI In order to achieve the objectives of the research survey +uestionnaire and case study method is used. The benefit and limitations of each method briefly discussed as follows.

C.,.1 S51327 452S"I#--AI12

(urvey +uestionnaire have become common research tools in the management resource development profession, particulary in practice as a part of comprehensive and systematic approach to identifying and analysing an organisation development needs (Rummler, 1 ". They provide a cost effective and reliable for getting feedback that may be +ualitative as well as +uantitative approach (Pres7ill, )**1 8 1=)". $ survey +uestionnaire can provide accurate and relevant data through thoughtful design, testing and detailed administration. In addition, a survey code ethics is used thatt the data produced must be presented in systematic manner, which represent the fact which they found. (urvey data not to be subject with manipulation, either statistically or in summary, so as to support or prove only special interest views. Therefore, safeguards to >res<ondents ano:mit: must ;e not onl: eC<ressed ;ut )uaranteed and lot of effort maintained for o=ercome difficulties? (C'llis a%d Huss-, )**:". 0ata collected in +uestionnaire survey may be both subjective and objective (Pe%%i%#1'%, )**) 8. 1<". *or choosing proper structure for +uestionnaire it is very critical factor in 9D

e)amining and obtaining favourable feedback. In paricular, each who is involved in the process of analysing data that should be generated by a +uestionnaire survey gave value information and apply weighted to the researcher opinion and more meaningful. In addition, analysts result shows same body of information differently depending what each person feels to be more, less or significant. "owever, for getting favorable response, it is possible when both objective and subjective combined by using +uestionnaire as well for analysis the data. There are many advantages in using survey +uestionnaire against other types for gathering research method. It is fle)ible, economical and less time consuming, completing +uestionnaire is simple and straight forward and does not re+uire e)cessiver time (;ell, )**)". They can be given to large population because they donot re+uire any individual geographical location to assemble in one primary place. *or gathering feedback without any unwanted involvement +uestionnaire is used rather to take individual interviews, focus group, and sometime need one site observation, respondent need tension free enviornment for their convience. In this way respondent feel free in answering the +uestion since there is no need to please the interviewers. *or selecting data collection method, one always remember in mind the enviornment in which +uestion is asked is only for the pupose of +uestion (;irel-, )**:". *inally the information provided by the respondents is influenced to their desire for answer the +uestionnaire, validity and financial consideration. @esearcher has shown that simplicity will positively affect and in return it increases overall response accurately (3'%#, )**:". 4n the other hand survey +uestionnaire got some disadvantages as well. They got generally low response rates, unreasonable, unsuitable for respondent due to poor literacy rate, no oppurtunity to correct misunderstanding or to offer e)planations or help, no control over the order in which +uestion are answered, incomplete response, incomplete +uestionnaire and no oppurtunity to collect ratings on assessment based on observation (O88e%heim, 1 ". "owever, to overcome these issues the researcher manage the +uestionnaire survey personally.

C.,.- I-"213I2WS
Interview can define as > a <u<oseful discussion ;et.een t.o or more <eo<le?(Kha% a%d Ca%%ell 1 , @i1ed i% 2au%ders e1 al., )***, 8.)=)". Interview is one of the most common tool is used for collecting data and helps to the researcher to gather reliable and 9,

valid data that are relevant to the research objectives. Interview can also be used for getting +uick response for such abstract variables as people#s attitude and opinion, this will enable the researcher to find out and describe the situation in different phenomena, or it can be used for e)planatory rearch as well. G)planatory or analytical research, according to Saunders (2000), will enable the researcher to e)amine and e)plain relationship between variables cause and effect. Interview may be highly structured and formali!ed and it depends upon the situation of respondents. It is also possible that, interviews can also be informal and unstructured. Interviews may be categorised as follows.

C.,.-=1; S"15C"5129 I-"213I2WS

To follow the same structure and se+uence of the +uestionsI

C.,.-=-; S2MI D S"15C"5129 I-"213I2WS

$sk the same +uestion but not necessary in the same se+uenceI

C.,.-=9; 6##S267 #1 5-S"15C"5129 I-"213I2WS

It will depend upon the interview flow and response. <o +uestionnaire or checklist is usedI a framework is established for selecting topic as a guidance for interviews. This is very useful method for data collection. The interview allows the interviewer to pick up on additional informationI the tone in people voices and facial e)pression both provide that information which is missed in +uestionnaire. $nother advatage of interview is the response rate. Interviews tend to produce higher response rate as few people refused to talk with interviewer who is directly infront of them, on the other hand +uestionnaire may be discard or ignore is easy (P'li1 a%d Hu%#ler, )**1".

91

Gspecially semi P structured interviews consider very good method which make the interviewer to giving his ideas, prompt response and investigate feelings , which +uestionnaire never be done especially such as sensitive issues like critical financial information of organisation.

C.,.9 #(S213A"I#-S
8ill and Eo%nson (2002), suggest that observation could take place from an office which is provided in the central site, where the day P to P day life which visit on site is onserved and gave a base from which the researcher could walk around and chat with individuals. asically, it can be done better through organisation#s meetings. The observer should be able to watch, record and analyse events of interest. (Sc%ut!, 1999F (lumer, 2000) argued that the criticism on observation without can lead towards the worst kind of subjectivism, whether observer sumarrised those factors, which leads to some degree removed by subse+uent behaviour of individuals. *urthermore, Sc%ut! and (lumer stressed that this method got no limits, it is time consuming as well, and also include interpretation, categori!ing and analysing of data, therefore it is not implemented.

C.,.C CAS2 S"59I2S

In research strategy case study is used which focus the dynamics present with single settings. 7in (2000) define case study as >an em<irical in=esti)ation into cotem<orar: <%enomenon o<eratin) in real life conteCt?. It is valuable rather than not feasible and not even ethically justifiable (&i%, )***+ Reme%-i e1 al., )**1+ Miles a%d Huberma%, 1 ".

$ case study got +uality for detailed e)amination of an event =or series of related events; which the analyst beliefs on e)hibits for the operation of some identified general theoretical principle (Mi1@hell, 1 ". $nother important advatage of case study is that material lies in the richness based their undestanding on reality. This means that it can work as effective device. ,ona;end (2000) stated that case study research is done by giving special attention to comple)ities in observation, construction, and analysis of data under study is done in such a way that it gave a larger view about the performance of the case study.

9%

(ell (2002) criticised very important issue,i.e for judging which merit of case study is sufficient and appropriate for a teacher who works in similar situation to relate his decision for how they described the case study. The reliability of case study is very important then generalisbility. $lthough it is a good approach for depth study of research , but in case study, the researcher does not control the situation. Ease study does not re+uire step P by P step data analysis, and this allows various opinions for research data. It is true , opinions could introduce bias, and affect the research outcome as well, therefore it is not considered. In this research case study of Pakistan islamic banking, survey +uestionnaire is used to find the data and (P(( is used for analysing the customer opinion of Islamic banking for measuring service +uality.

C.,.C=a; CAS2 S"597 92SI8- ACC2&"A(I6I"7

7in (2000) suggest that for measuring any research study validity should be confirmed by passing certain design test which regards to various level of research. 7in (2000) gave four design testH

1. Construct 3alidit:A establishing correct operational measures for the concept being
studiedI

). Internal 3alidit:A establishing a casual realtionship, whereby certain conditions are

shown to lead to other conditions, as distinguish from false realtionshipI

:. 2Cternal 3alidit:A establishing the domain to which study finding#s can be

generalisedI

=. 1elia;ilit:A presented that the operations of study, such as the data collection
procedures can be repeated with the same result.

C.,.C=b; M56"I&62 CAS2 S"59I2S

C'

Ease study may be single or multiple case designs. Multiple case study strenghten the result by getting through pattern matching, thus increasing confidence in the udepinning the theory. The use of multiple cases in study shows the e)act idea of topic under investigation and as reult it developed empirical evidence to support which shapen the theory. The approach for case study involves in theory building and verification rather than testing (Dila%1hi Amara1u%#a ()**1".

C.,.C=c; 6IMI"A"I#-S #F CAS2 S"597 12S2A1C

Ease study research forms on the core of this resarch study. Ease study methods has many advantages but there are certain criticism. In case study method criticism is that it suffers from a lack of rigour and e)cess of judgment. The danger of ad hoc theorising and of neglecting to test data are great. The use of subjective judgements during the data collection stages can construct invalid. $ccording to (romle: (1999) researcher usually impact on the internal validity of data. $nother suggestion by (ec'er (2000) and agrees that researcher may have feelings for the subjects and conclusion are drawn from a lack of reliability. G)ternal validity is also difficult to measure (;er#er, 1 ". It is difficult to generalise findings to different setting and conte)t are necessarily dependent. The evidence from multiple case study is considered more compelling and studies involving multiple cases are regarded more strength. 8hether resulting theory is generalisable is related to the comple)ity of e)ternal validity, i.e whether e)ternal conditions are thought to produce much variations in the topic being studied. In the contect of research the critical aspect of case study is that it provide a limited bases for the traditional scientific generalisation. (&i%, )***+ Reme%-i e1 al., )**1". <owwithstanding like all e)perimental observations, case study result can be formulated for theoretical prepositions =analytical generalisation; but not to popualtion or universes =staistical generalisation;. Thus, the aim of case study is not persuade to global finding form a sample to population, but rather to undestand and articulate patterns and linkages of theoretical importance. Santos (1999) stated that, it is not possible to elaborate detail and direct comparison of data.

C1

$ccording to 7in (2000), the +uality of any given design can be judged according to the following four previously mentioned testsH construct validity, internal validity, e)ternal validity and reliability.

C.,.& F#C5S 81#5&

$lthough focus group is a good way of capturing the responses of participants with regards to feelings, interactions, emotions, deeply hidden fears and desires, these are diffcult to discovered through straight forward interviews (Filedin)s and "%omas , 2001F Wis'er, 2000), they were not considered due to time consuming and difficulty in controlling the discussion and focused on the topic been discussed, as well as the differences in the cultural conte)t and beliefs of the participants.

=.!

PRIMARY DATA

Primary data is the data collected for a specific purpose directly form its source. This research method is generally prefer by the researcher because the research is projected towards the specific objectives of the study and ensure that, all the issues of the research topic are highlighted. The primary techni+ues of data collection will be mainly +uestionnaires, interviews, observation, case study and focus group. Multi5methods approach will give the advantage of facilitating combination to take place as it is the mi)ture of Methodologies in the same research (2@a%dura a%d 6illiams )***". To collect primary data a case study and survey +uestionnaire is used and analyse the data through (P(( for getting the opinion of customers in Islamic banking. Pakistan Islamic banking is selected to collect primary data from +uestionnaire and annual finacial report as well. The other primary data techni+ues are as follows.

=.

SECONDARY DATA

The secondary data is the second hand information received by the researcher from previous survey conducted by others. The main objective of using this type of data is that it is less time consuming and thus economical. @eferring to some published articles through

C-

the internet about this subject was the source of secondary data used in order to understand thoroughly the topic. Through, the secondary data is preferred for instant availability, it has it own limitation, like in appropriateness of +uestionnaire one would have used and data may not be accurate and updated (;irle-, )**:". The researched may need to e)ploit the data with a little bit of imagination, creativity and compromise it to obtain satisfactory measures. (econdary data include both +uantitative and +ualitative data, and they can be used both descriptive and e)planatory research. The data researcher use may be raw data, where there has been little of any processing, or compiled data that have received some form of selection or summarising (Ker?i%, )***". $ccording to 2au%ders ()**:", within business and management research such data is used mostly in case study and survey type research. "owever, there is no reason not to include secondary data in e)perimental research. ecause of inade+uate time, the research findings are mostly will be from background information such as secondary data. $s the secondary data collection processes dose not always include about collecting and reproducing it in a similar form but rather in the secondary data will address the research objectives and form the good reliable starting point for the research =;r-ma% a%d ;ell )**)". To understand the role of Islamic banks and financial institutions in Pakistan for

measuring service +uality of Islamic banks . To have a proper undestanding about the impact and contribution of financial instruments in business and their risk management the case study method is used to collect the secondary data that is described earlier. The re+uired information is e)tracted from the secondary sources such as financial institutions reports, journals, articles and internet etc and analysis by (P(( for meauring the opnions of Islamic anking customer satisfaction. The other secondary data collection method are briefly e)plain as below.

C.%.1 SAM&6I-8
Saunders (200@) describe that, sampling techni+ues provides multi method that enable researcher to reduce their amount of data research that needs to collect a data from C9

subgroup rather than all possible cases or elements. (ome research +uestion re+uired sample data for collecting all information. "owever, if researcher want to be deep research, then it will need to research with; and a group =sample; of employees and large organi!ation, by taking interviews, the researcher also select case study =sample managers to interview. Techni+ues for selecting sample are very important. $ccor ding to Saunders (200@), the full sample is taken is called population. In sampling, the term BPopulation# is not in normal sense, as the full set of cases need not necessarily by people.

C.%.- &I6#" S"597

The term pilot study is also used by two different ways in social science research. It can also be called as feasibility studies which are small scale versions or trial run, done in preparation for the major study. (P'li1 e1 al., )**1B=59". Pilot study, other tool is also known as the pre testing or trying out for particular research. (;a7er )***B 1!)C:". 4ne advantage of pilot study is that it shows you where your main research project could fail, when research protocols may not be followed, or your research methods are inappropriate. $ccording to De>aus (1 :B <=" Ldo not take risk, pilot study firstA. This is the main reason for undertaking a pilot study, these studies can be based on +uantitative:+ualitative methods and large scale studies might employ a number of pilot studies before the main survey is conducted. Pilot studies may also try to identify potential practical problems in conducting research. (>a% TeiAli%#e% e1 al. )**1".

CC

CHAPTER 0I>E

C&

ANA3&2I2 AND 0INDIN42

CHAPTER <
<.

ANA3&2I2 AND 0INDIN42

In this chapter we analyses the findings related to customer satisfaction with Islamic anking service in Pakistan. (o therfore, the Islamic banks face various competitive pressures from traditional commercial bank.The scope of competition has grown in recent years includes every financial market , product and services. 0ue to highly competitive enviornment, for clearly undestanding the behaviour, attitudes and perception of the customer, it is necessary for Islamic ank to implmented successful marketing strategy. Eustomer analyses has always been a priority of Islamic anking, especially during past two decades. Islamic anks belong to private sector organisationsI therefore there top measures the level of customer mangement priorities are growth, productivity and

satisfaction. Muestionnnaire are formulated for measure the performance of customers

CD

satisfaction. 0ifferent factors and influences create customer behaviour and it should be dependen upon respondents reply. Therefore, this mission could be achieved by identifying a complete profile of Islamic anking customers which includes their banking habits, attitudes, selection criteria, awareness and usage of various Islamic banking products and their degree of satisfaction. *or undestanding these , researcher carry out his data analysis by descriptive statistics. The strategy adopted by Islamic ank for getting effective marketing plan is achieve due to maintain up to date customer profile, that includes age, income , education level, gender and other social demographic factors.

5.1 ANALYSIS OF ISLAMIC BANK <.1.1 Perso !" Pro#$"e o# Res%o &e 's
Table &.1 present a back ground of respondents who pariticipating in this study.

0REDUENC& AGE -' P -& -& P 9' 9' P 9& 9& P C' C' P C& C& P &' &' P && && P D' D' P D& D& P ,' GENDER Male 1 D -9 , D & % , C 1D 1' C,

PERCENTA4E 1.' 19.9 1-., ,.D %., 11.' 1-.C %.% %.9 9.C &9.9

*emale EDUCATION LEVEL <o formal +ualification /E(G: TGE $ 2evel: TGE <ational "<0:0egree Professional Mualification "igher ANNUAL INCOME( Rs) @s ' P 1'',''' @s 1'',''' P -'',''' @s -'',''' P 9'',''' @s 9'',''' P C'',''' @s C'',''' P &'',''' @s &'',''' P D'',''' @s D'',''' P ,'',''' More than @s ,'','''

1, 1, 1C 119 % -9 , 11 119 -9 9 C D

C9., 1-.' 1D.' 1&.1 1%.1,.% 1%.' 1.1-.C 1C.' 1D.% -,.9 C.&.D %.&

$ccording to table D.1, more than ,C., 3 respondent between the age group of -& and && years old. &9.' 3 customers were male and C9.'3 is female. ecause, this is due to the nature of muslims society where males do dealings with banking. Majority of customers should be pakistani national and muslims. "alf of the customer earned less than @s C'',''' to &'',''', annually. Majority of customer got higher degree with 1%.' 3 having al least master degree. This shows that two third of people are educated.

<.1.) Re!so s o# C*s'o+er De!"$ , -$'. /o'. '0%es o# B! 1s

Table &.- present the reasons for dealing customer with both types of bank.

2TRON43 & A4REE Fre2

The Islamic bank does not offer some of the products =facilities; offered by a commercial bank. The Islamic bank

A4REE Fre 2 3

NO >IE6 Fre2 3

DI2A4RE E Fre2 3

2TRON43& DI2A4REE Fre2 3

-&

D'

--

1'.&

1%

CD C1

1'.&

1C

91

does not offer many of the products =facilities; offered by a commercial bank. 4pening hours of Islamic bank are limited 4pening of two accounts gave me the oppurtunity to diversify my investment oth types of bank have limited number of branches and opening two accounts gave access to more branches.

-9

&'

11

19

-,

--

-C

&&

11

1,

C9

1'

-C.C

19

-D.C

$ccording to table D.- majority of customer using both types of banks, due the some product offered by convential bank , because these products are not available through islamic banks.*urthemore, ,, 3 of the respondent using both types of bank, because want diversification in investment. 4ther reason for using both type of banking is that, &% 3 opening time of Islamic bank are limited. 4ther reason is that , many customers metioned that both types of bank got limited number of branches and by opening two differnt bank account it will gave fle)ibility with more choices of banks. C% 3 respondent mentioned this thing. This findings is very important for Islamic market. anking in Pakistan. The Islamic should be more fle)ible for overcome this issue , if they want to survive competitive in

<.1.: C*s'o+er A-!re ess ! & *se o# &$##ere ' Pro&*4's5Ser6$4es o##ere& /0 Is"!+$4 B! 1.
8hether or not customers were aware of Islamic banking products or services are presented in table &.9 A6ARE AND DONET U2E O0 IT

NOT A6ARE O0 IT

A6ARE AND U2E O0 IT

C%

0re/ Eurrent $ccount Time 0eposit $ccount Murabaha Mudaraba Musharka Ijara Ijara 8aktina Musana Traveller#s Ehe+ue Money 4rders 4verdraft $utomated (elf (ervie 2etters of credit /uarantees (pecially ordered bank statement 11 1& -, -D -C 91 -% 9, -& 9' 9& -' -C &

F 1,.1 -1.% 9%.1 91.9 9&.9 9,.% C'.C%.C 9C., 91.D -%.C ,.9 -,.1 -%.1 11.1

0re/ 1' 9% 99 9D 9C -% 99 -% 9& 991 -, 99 9' -1

F 1C.& &,.1 C1.% CD., &'.' C-.1 C%.D 9%.C C1.D C9.1 C-.C 9C.9 CD.C C1.1 9-.,

0re/ C, 19 1C 1& % 11 % D 11D 1, 9, 1% 1, 9%

F D1.C 1%.9 11.C 1%.C 19.1%.' 1'.1 11.1 1D.D 1,.1 -'.9 &9.1 -&.' -,.C,.C

&'

$ccording to above table D.9, mostly customers are unaware of products :services by the Islamic ank e.g. Mudarba =91.93;, Musharka=9&.93;, traveller che+ue =9C.,3;, Ijara =9,.%3;, money order =91.D3;, Ijara waktina =C'.-3;, and Musana =C%.C3;. The lot of respondents =1,.C3; were aware automated self service, =&9.13; use it. (imilarly, order bank statement were known to mostly customers =1'.13;, =C,.C3; and they used them. Eustomers =1-.%3; are well aware of current account, =D1.C3; of them have fre+uently use it and were aware of automated self service round about =&9.13; of sample used. Mostly produsts:services are known by customer but few of them use it.

<.1.= Re!so s '.!' Mo'$6!'e C*s'o+ers 'o De!" -$'. Is"!+$4 B! 1

There are different reason of customers to motivate to deal with islamic bank presented in briefly in table &.C.

&1

>A3UE

2TRON43& A4REE 0re/ F ,1.D C.1 1-.% 1-., -C.1,.9 %.9 -,., C., ,.& 5 1%.D %.9 1'.C -9.D.9

A4REE 0re/ 11 1 1, 11 % -& -C -9 99 -9 -1 9& -, 9' -% 99 F --.9 1'., -C.' -D.& 1-.9 9&.9 9C.D 9C.& C1.9 9&., -%., C%.9 91.C C-.9 9C.9 &1.'

NO >IE6 0re/ -1 -' 1, -' 1& 11 1C -' -, 9% 19 -, -1 -, 9' F -.& --.1 -1.-&.9 -1.9 -1., -1.9 -&.& 91.& C1.9 &9.1 1,.9 91.C 9%.C -C.1 9D.1

DI2A4REE 0re/ -C 1& 1, 1& , 1 1 1' C , 9 D 5 1 1 F 1.& 9'.D -1.-C.' -1., 11.9 19.& 1., 1C.D &.9 11.& C.D ,.& 5 9.& 1.&

2TRON43 & DI2A4REE 0re/ F 5 -1 D &.& 9 9 5 D C 1 C 1 9 5 -1.1 1., 1.& ,.% &., &.& 5 9.1 ,., &.1., 9.1 -.% 1.& -.C

@eligious reason only Profitability reasons @eligious and profit reason $dvice from relatives $dvice from friends ank location 2ow service charges ank confident ank effeciency in completing Trans 8ide range of facil offered by the bank Muality advice offered by bank personnel ank reputation Eonfidence in the bank# Management Eonfidence in bank#s board of directors (hariah (upervisory Eommittee (ocial and friendly features of bank#s personnel The Islamic bank offer the same facilities that offered by Eomm bank but observes shariah principles

D9 9 % , 11 19 , -1 % 9 5 19 D , 1, 19

1,

--.9

9'

9-.,

11

-%.-

1.&

$ccording to table &.C, the religious reason is the most important factor that motivates respondent to deal with islamic bank. Majority of respondents =%9.%3; are either agreed or strongly agreed to deal with Islamic bank.The above findings shows that religious factors is very important as compared to profitability motive. Most respondents =&%.C3; disagree or strongly disagree that profitability is important factor for choice of bank. Therefore, the above each factor is considerd individually, respondents are not in clear, that why they deal islamic bank either religious or profitability.Islamic bank reputation and image is second &-

important factor. Majority of customer agreed =C%.93; or strongly agreed =1%.D3 ; that reputation is one key factor for selecting bank. The majority of customer =D-.-3; strongly agree that confidentially of Islamic bank is another important reason to deal with. Eonfidence in (hariah (upervisory Eommittee was fourth important reason to deal with. Most customer =&,.& 3; agreed or strongly agreed with it. The fifth most important reason is to deal with islamic bank is that strongly agreed with it. 4ther important reasons that motivates customer to deal with islamic bank i.e social and friendly fetaures of islamic bank personnel =C%.13;, efficient and +uick services, confidence on Islamic bank 40, and bank location. @easons like advice from relatives or friends not likely to play a vital role to respondents in banking choice to deal with islamic banks. ank observes shariah principles when offering the same facilities like conventional bank. @ound about two5fifth of customer =&&3; are

<.1.< De,ree o# s!'$s#!4'$o o# ser6$4es o##ere& /0 '.e Is"!+$4 B! 1

To find out the level of customer satisafaction or dissatisfaction , table &.& is presented

21r'%#lA#ree 0re/ F

A#ree

N' >ie$

Disa#ree

21r'%#lDisa#ree 0re/ F

0re/

0re/

0re/

&9

Eonvient branch location Eonvient opening hours 8ide range of services Gasily undestood statement Gasy to get information Eonfidence in ank management. The cost of the service offered by the bank. Physical facilities Parking facilities Personal neat appearence. Gmployees (kill and knowledge Gmployees willing to help

-9

-%.&

9%

&C.9

11.C

1.C

1.,

99

C&.&

1%

-&.&

11.%

1.C

1.,

99

C,.C

--

91.1

1'.D

1.C

19

1D.9

C1

D'.9

1&

1%.D

1.%

1.C

&

D.%

9'

C1.,

1,

-9.D

1C

1%.C

1.9

11

1,.%

91

9%.1

-%

9D.9

9.C

1.C

1'.%

9'

C9.,

-D

99.C

-.D

C.D

&

1.%

9C

C9.&

1D

-&.'

1'.D

,.%

1.1

11

1&.D

1%

-C.'

-9

-,.D

1%

-&.1

C.%

C9

&,.%

-'

-1.1

9.,

9.-

D.9

C9

D'.1

-9

91.9

1.9

&

9.9

9%

&9.C

-9

91.-

&

,.-

1.C

&C

Individual attention 6nderstand specific needs Promise fullfilled on time Gfficiency in services for completing transaction (ervice at time $ccurate services (ervice performance (atisfaction level Meet e)pectations G)cellent (ervice +uality @ecommend to deal with Islamic ank 8ant to switch my account

D.-

1D

-1.%

-&

9D.&

-'

-C.%

1'.-

D.C

91

C9.9

-%

9%.%

D.1

9.1

D.-

9'

C-.%

91

C1.,

9.9

-.9

9.1

91

C9.C

--

91.1

1C.-

&

,.%

9.1

9-

CC.C

-%

C'.9

9.1

&.1

,.9

9&

&'.'

-D

9,.&

1.C

-.C

9.1

9&

&'.'

-,

9C.,

&

&.9

D.1

1,

-1.1

9'

9%.1

-9

-D.-

&

D.9

C.C

D.C

-'

91.-

CC

&,.9

9.1

1.9

1'.'

9,

C,.&

-1

-1.-

1.9

C.-

1C

1,.,

-D

99.-

99

C-.9

9.9

1.C

--.1

19

11.9

--

-9.9

-1

-,.1

D.,

&&

Majority of customer =19.13; are satisfied due to bank convients location. These findings donot seem to be fit for deal with islamic bank. 0ue to convience is a reason for dealing with bank. The second factor is that bank statement is easily undestandable, which shows =,D.D3 ; of the customer were satisfied. 0ue to bank employees re+uired skill and knowledge to performing the services is good, mostly customers =DD.C 3; were satisfied. The fourth degree of customer satisfaction is due to e)ternal appearence of bank#s personnel, =D-.13; customer were very satisfied with it. Mostly customer =&D.,3; seem very satisfied due to bank employees which always been ready to help. This shows a good customer relationship. 4ther si) degrees with regard to customer satisfaction i.e islamic bank perform accurate services, after considering that we can say customer are e)tremely satisfied with islamic bank, but the overall service +uality is fine. 0ue to convenient bank opening hours and as well confidence in bank management, a lot of customer =&C.-3; seem to be satisfied. 4ther issues e)cluding parking facilities, showed more customer satisfaction than dissatisfaction. 8ith regarding to parking facilities =&9.C3; were seem to be dissatisfied. "owever, =C'.C3; customer switch over to other accounts. *urthermore we elaborated that four fifth =9,.-3; customers of islamic bank donot gave any opnion regarding to their satisfaction or dissatisfaction , which donot meet with their e)pectations.

&D

CHAPTER 2IG DI2CU22ION O0 0INDIN42

CHAPTER 5
5. DI2CU22ION O0 0INDIN42
This chapter is about dicussion on issues which are raised in this and in the light of relevant literature, and findings of the researcher . Islamic comprehensive detail is provided in chapter five. anking are asked about their view, as well as they are satisfied for dealing with banks. *or researcher findings,

&,

7.1

Co+%!r$'$6e A !"0s$s

Many reseachers such as S%oo' and asan (19**), 2rol and 2lD(odour (19*9), 2lD(odour et al. (1990), Sundin et al. (1990), and -aser et al. (1999), have done research for measuring the attitudes and criteria that why the customers deal with specific bank. y using these three author studies 2rol and 2lD(dour, 19*9F 2rol et al. 1990F and -asir et al. 1999F the researcher find out about the bank selection criteria that used by pakistani customers to deal with islamic banks. 4ther authors such as 6e=eGue and Mc9ou)all (199/) and -asir et al. (1999) studies shows that customer overall satisfaction create great impact on bank selection criteria. There are many factors which make customers to deal with specific banks, as evident by the following authors studies. (A%ders'% e1 al., 1 95+ Ta% a%d Chua+ 1 !5+ 3ar'@he a%d Ta-l'r, 1 !!+ Er'l a%d ElC;d'ur. 1 ! + De%1'% a%d Cha%, 1 1 + Kha,eh a%d De@7er, 1 The banking selection literature shows different 1+ Er'l e1 al., 1 1+ Ka-%a7 e1 al., ". )+ 3e?es/ue a%d M@D'u#hall, 1 5+ Nasir e1 al., 1

features such as location availability,

friends recommendation, reputation of bank, credit availability, competitive interest rates , friendliness of bank employees , low service charges, satisfactory banking hours, availability of $TM, and special services etc. The importance that these factors varies with one country to another with respect to age factors, gender, income , martial status, occupation and cultural background of customers , whether they dealing with islamic or conventional (Nasir e1 al., 1 ".

*rom this study it is clear that majority of respondents of both bank have certain reasons to deal with them. *uthermore, findings elaborated that, these certain fators donot play a single role in customer selection. Eustomer satisfaction selection criteria is uni+ue to deal with Islamic bank. These selection citeria findings discuss seperately in ne)t section. @eligious reason is uni+ue criterial for customer to deal with islamic bank. "owever, three +uarter =,1.D3; of customer are strongly agreed with it while less than one +uarter =--.,3; are agreed that is the main pupose to deal with islamic bank. It is very uni+ue and interesting , that only one of respondent =1.&3 of sample; had no opinion with religious motives and other who disagreed with it. @elating to this issue shows that this is not the case &1

some decades or two years ago. *urthemore, in this issue resarcher is not agree with the reports by 2rol and 2ID (dour 19*9 as well as their previous findings given by 2lD(dour, 19*0). These two authors stated that >reli)ious moti=ation did not a<<ear to ;e t%e <rimar: criteria for selection of Islamic ;an'in) ser=ices? (8.::". "owever these authors find out this would happen due to respondents misundestanding when they answering the +uestion. "owever, at the end of 1%%' customers perception is totally changed , they consider religious reason is very important to deal with Islamic bank. 8hen -asir et al., 1999 making research on it and find out that %9.%3 of respondent >a)reed or stron)l: a)reed t%at reli)ious reasons are =er: im<ortant? . @eseacher finding should be clear that, the main purpose of customer to deal with islamic bank is religious reasons. The findings of -aser et al., 1999 clearly e)plained that religious *urthemore, depositing more in Islamic banks. @esearcher findings e)plain that profitability reason is not very important to deal with Islamic bank, though its importance is for customers of conventional bank than islamic bank , because of profit ma)imising nature of conventional bank. In contrast we stated that islamic bank promotes banking on religious reasons by observing the Islamic shariah Principles. "owever, findings e)plained that profitability is not important for islamic banking customer due to the changed in their attitudes for dealing with Islamic ank. *urthermore, researcher findings is diasgree with the reports is given by 2lD(dour 19*0, and 2rol and 2lD(dour (19*9). $cording to these authors report , the perception of customer to deal with isalmic bank is due to profitabiliy ma)imising behaviour. *urthermore, -aser et al.,(1999) make this research to a similar task. ut they reported that C-.9 3 of respondent disagree or strongly disagree with this reason of profitability, as compared to -,.- 3 respondent agreed or strongly agreed. These recent findings of researcher proves that customer seleted Islamic bank due to religious reasons, not a motive of ma)imising their profit. *urther in the case of Islamic banks, religious and profitability reason is main selection criteria of bank, by the customers. It is not suprising that mostly respondent =&%.C3; rejected profitability reasons to deal with islamic bank, which past authors consider main purpose to deal with islamic bank. The rearcher findings agreed with 2rol and 2D(dour 19*9 statement they define as > .%en reli)ious and <rofita;ilit: reasons .ere com;ined it factor is very important during last years. this evidence proves that religious reason is important that whty peole

&%

did not seem to ma'e an: differnce tocustomer ;e%a=iour?. They e)plained that, their findings by the >fact t%at t%eir customer %a=e ;een used to t%e con=entional interest ;an'in) en=iornment, so t%e: %a=e ;ecome <rofit oriented csutomers?. "owever their e)planation donot seem convincing with the present findings of the rearcher, and argued above, that customer is non profit oriented. $nother important factor is consider important in todays banking selection criteria such as bank reputaion and image. "owever, for the islamic banking customers , they consider this image and reputation as second important factor after religious reason for selecting bank. 8ith regarding to profit ma)imising nature of commercial bank, customer donot consider this factor as compare to Islamic bank. *urthemore for considering to choosing the customer to deal with conventional bank and Islamic bank , we measure this in terms of percentage, for choosing particular factor, such as stated that =D1.%3; of Islamic bank customer chose it while D,.&3 of conventional bank, customer chose it, as a result they shows similar choices for both customer , but despite of the fact that respondents are ,& and ,- for the islamic and conventional bank respectively. -asir et al., 1999 also bring same research on choice of customers for Islamic bank. They find out that ,- 3 of respondents are agreed or strongly agreed with this reason. Many other researcher, studying both types also bring their research in same field for customer selection (A%ders'% e1 al., 1 95+ Ta% a%d Chua+ 1 !5+ 3ar'@he a%d Ta-l'r, 1 !!+ Er'l a%d ElC;d'ur. 1 ! + De%1'% a%d Cha%, 1 Ka-%a7 e1 al., 1 e1 al., 1 + Kha,eh a%d De@7er, 1 1+ Er'l e1 al., 1 1+ )+ 3e?es/ue a%d M@D'u#hall, 1 5+ Nasir

". "owever, we stated that bank reputation and image plays a very important role

for attracting customer to deal with certain bank. $nother researcher "ilia'ou (1999), bring his research by studying two commercial bank in /reece, and reported that , three +uarter of customer deals with Guro commercial bank as compared to their <ational bank. This is because due to negative image of customer self esteem needs. The third important reason for customer to deal with bank is due to their old establishment as compared with Islamic bank. Thats why commercial bank got priority due to their establishment as compare with Islamic bank.. "ence it is possible that, commercial banks customer donot give confidentially for granted, as on the other hand islamic bank focus more as compared with conventional bank. *ew researchers ealborated that pakistan customer dealed with islamic bank due to three reasons, firstly efficient and fast services for completing transaction, secondly bank#s reputation and image, and lastly confident to deal with bank ( Er'l a%d ElC;d'ur, 1 ! + Er'l a1 al., 1 D' *+ Nasir e1 al., 1 " . These findings

shows to the researcher that confidence in bank dealing is one of the most important reason to deal with islamic bnak as compared with other two reasons, that could be discussed later on. -asir et al., 1999, findings prove that , =D93; of respondents are strongly agreed with these reason. *or removing errors and 4missions of Islamic Principles, the practice and activities of Islamic banking is not conflicting, with islamic ethics. It is necessary for Islamic anks that they establish a @eligious (upervisory Eommittee =@(E; or the (hariah (upervisory oard =((E;, consisting of Muslims law and principles advisors of Islamic commitee. Therfeore we stated, that ((E is uni+ue feature of Islamic bank and customer belief confidence on that committe. Thats why confidence on ((E is main reason that motivate customer to deal with Islamic banks. -asir et al., 1999 also prove this and majority of respondents are agreed with it. $nother reasons is that conventional banking offered same facilities like other Islamic banks but they donot observe the (hariah principles. This is important factor due to religious reasons. Eustomer attracting more to Islamic banking. That is why observing the (hariah is the third uni+ue feature of Islamic bank that not offered by conventional banks. -asir et al., 1999 reported that majority of customer strongly agreed with it. $nother fourth important uni+ue factor for attracting the Islamic bank customers, is the confidence on ank oard of 0irectors. This is possible due to effect due to lot work of its gave any opnion about this factor. *or selecting certain specific bank, social and friendly features of bank personnel, +uick and efficient services for completing transaction, bank location are also consider most important factor for customer to deal with islamic or conventional banking. ank location has been shown as a special reason for selecting bank ( A%ders'% e1 al., 1 95+ 3ar'@he a%d Ta-l'r, 1 !!". 2ocation is very important factor for banking customers under the age of &' as compared to other age groups. Majority of customers D13 is &' years old as compared with younger people. $s concerning to provision of +uick and efficient services is discussed above, that is one of the reasons of Pakistan customer to deal with Islamic banking ( Er'l a%d ElC;d'ur, 1 ! + Er'l a1 al., 1 *+ Nasir e1 al., 1 " . The majority of our respondents 1". were male thats one of the most importannt factor (Ka-%a7 e1 al., 1 ank#s reputation and image, and it creates positively oard of 0irectors. "owever, lot of customer =91.C3; donot

D1

Eustomers who got primary education they regarded, friendliness of bank employees, +uick and efficient service, bank locations =availability of credit; is most important factor, than customers who got only primary education (Ka-%a7 e1 al., 1 1". The lot of customer education level is high as well as in islamic and conventional banking. @esearchers findings shows that certain factors such as =advice from relatives:friends, +uality of services and other factors; donot like to be seem very important for customer selection. -aser et al., 1999, e)plained that these factors are not important for customer satisfaction. They stated that >ad=ice from realti=es (2@ <er cent)and from friends is (@2 <er cent) did not a<<ear to <la: a maHor role in ;an'in) c%oices of customers .%o used an islamic ;an'?. @esearcher findings strongly disagree with statement by 2rol and 2lD(dour (19*9 <.@@). There results shows that >inter<ersonal contact and indi=idual efforts <la:ed an im<ortant role in terms of attractin) indi=idual to utilise ;an'in) ser=ices offered t%rou)% islamic ;an's?. *urther they added that the people who are at same age group plays important role for dealing with islamic bank, because they may be aware of these services that should be use by their relatives and neighbours. @esearcher finding and -asir et al., 1999 findings shows that people perception of islamic banking should be changed after sometime. @esearcher findings =in table D.&; shows that majority respondents =19.13; are satisfied with bank convient location, easily understand bank statement is round about =,,.D3;, employeed re+uired skill and knowledge =DD.C3;, personal appearence of bank personnel =D-.13;. These percentage shows clearly that Islamic bank customer is more satisfied with these features. -asir et al., 1999, indicate that =&%.93; of customer were satisfied with personal bank proficiency. *or e)ample if we consider the easily understandable bank statement than proficiency of bank statement is +uite high. @esearcher findings also shows that most of the customer are fully satisfied with employee re+uired skill and knowedge but disagree with the statement of 2rol and 2lD(dour (19*9). Their statement is about that majority of Islamic bank employees, have low efficiency and lack e)perience, and researcher findings shown them, majority of employees working in Islamic bank is the former employee of conventional banking (I/bal a%d Mira7h'r, 1 !9". *urther we argued that researcher finding prove that Islamic bank employees have re+uired skill and knowledge about islamic banking and in this way they improve their e)perience for performing services. "owever, customer of Islamic bank were dissatisfied with parking facilities provided by their bank and there are also some other factors that move their accounts somewhere else. D-

These areas should be addressed seriously by islamic bank, other wise they lose their customers. The other three aspects which shows customer satisfaction is proficiency of bank personal, bank management, and efficiency for completing transaction all these have been proved by -asir et al., 1999, it is very important factor for customer ssatisfaction. unfortunately these percentage of high satisfaction level is low in Islamic banking. @esearcher findings also prove by -asir et al.,(1999) about the confidence on bank#s management was same to the findings of present study. *urthermore, researcher findings is not agreed with other authors statement of bank opening hours. $fter all this discussion we can say that customer is well aware of Islamic banking products:services. "owever, most of them do not use it. *or e)ample, D'3 of customer was aware of current accounts and used this service. "ere at this point researcher findings would agree with -aser et al.,1999 findings.@esearcher findings shows that majority of respondent of our customers were unaware of islamic banking products such as Murabaha, Mudarba, Musharka, Ijara ,Ijara 8aktina, Musana, all which creates uni+ue in Islamic banking products =also mi)ed bank;, most of them are aware but they do not even invested. -aser et al., 1999 bring same research to the above task, and stated that > It is also clear t%at a si!ea;le num;er of res<ondents mentioned t%at t%e: .ere a.are of s<ecific Islamic terms of Mura;a%a, Mudara;a and Mus%ara'a, ;ut t%e: do not usin) t%ese s<ecific t:<es of Islamic (an'in)?. $nother major important factor is that friends and realtives work in a bank to attract customers. agree or disagree with them. ut in different areas customers give no opnion about the +uestion they asked whether they are ut

D.1.1 ISS52S I- AIMS A-9 #(E2C"I32S

@esearcher addressed number of issues relating to find out the degree of customer satisfaction and dissatisfaction of Islamic bank in previous chapters. *or overcome these issues, which are raised in this work they need a vast range of literature review for cleared objective to achieves. The main objective of the research is measure the degree of satisfaction towards the Islamic banks in Pakistan. Karious issues re+uire attention for achieving the success re+uired by reasearcher. The scope of study is very vast, it is a fact that conventional banks got lot of e)pertise, e)perience which achieves through years. ut on the other hand, Islamic banking D9

consider as a new innovation in most countries including Islamic world. Therfore Islamic banking re+uire lot of in depth research and vast investigation, in the light of poor literature of islamic banking, as a whole to improve customer satisfaction. The criticle point of this research is that , study is based on future investigation. These findings clearly shows that religious reason is the main important factor for consumer attitude to deal with Islamic bank but after some time it is consider unimportant due to change in consumer habits. The different objectives establish for this study are achieved e.g to measure the degree of customer satisfaction with Islamic banks in Pakistan, based on the customers response rate. This discussion also proves that for measuring the satisfaction level of customers that should be agreed or disagreed, is given by the arguments that are in the literature review. The researcher findings also highlighted that there are some defects in our findings which are not even matched with previous authors reports. *actors which discussed previously shows that they motivate customer to deal with islamic banking. The main key factor of islamic banking for dealing is religious reasons which shows that , there is need of more development in these factors that should take time. @esearcher findings also indicated that different cutomer have different priorities for selecting bank convential as well as Islamic banking. *urther, we argued that respondent attitudes of selection is our second objective, for finding out that customer utilise all factors is successfully achieved. 4ther findings shows that most of Islamic banking customers were not well aware of many islamic banking products:services that offered by bank. This should be further e)plains that most customers are well aware of products but they donot used it. This is necessary for Islamic banks that they practices to arrange advertisement and campaigns for educating customers. @esearcher findings of study shows that customer gave more attention and gave priority to these factors for selecting bank, above and previous discussion in other chapters gave a comparision for measure a degree of customer satisfaction in Islamic bank. (o, futhermore, we argued that our fourth objective, for measuring the degree of customer satisfaction in Islamic bank, and the fifth objective for finding those reasons, customer consider on prior basis for selecting bank is being achieved.

DC

*uthermore, the aims and objectives of this study have been achieved for this important research.

D.1.- I-F652-C2S
The resources and issues which are raised in the literature of Islamic banking is limited. 0espite of this the available resources is successfully used for briniging this research. The other authors like 2lD(dour, 2rol, -asir and their collea+ues give comprehensive sources for discussing, comparing and contrasting of this present research. *or e)tending the scope of study, the main purpose of study is achieved by reviewing the literature of customer satisfaction. @esearcher hope these findings bring very valuable addition in e)isting literature of customer satisfaction in Islamic banks.

D.1.9 A-A67SIS
The analysis is provided by the researcher is consider as a very important, the basis, or material should be achieved in depth research for dealing with these issues. The analysis given by the researcher is not perfect, there are certain gaps regarding to academic and professional research in this study. *or e)ample, time limitation is very important for this study. Projects thinking , formulating aims and objectives, hypothesis and +uestion, wide range of reviewing literature, formulate research instruments, field work, analysis result and finally writing of dissertation is done in very short time. This happened due to find out the assumption and limitation of e)isting literature for adding valuable research and aaditional knowledge to the present research. 0ue to time constraints, it is not possible to use more than one research instrument ,and itis true it is not feasible for researcher to carried out his field survey, and taking interviews of bank officials, customers and employees in the country. "owever, it is necessary that , for carried out research for this kind of project, re+uired long period of time, and also allow u to implemented more than one research instruments. Triangulation, use of multiple methods is also used in depth to clearly undestand the research project. (De%,i% a%d 3i%@'l%, 1 !".

D.1.C 62A1-I-8 F1#M " IS 12S2A1C

*or beginning this project, several issues have been learned from it. *irstly, we considered findings are very important in this kind of research. 0ue to limited published material is

D&

available about customer selection and satisfaction of Islamic banking products and facilities offered by them is also a issue. 4ther issue is that, for carrying out this kind of research , it re+uires more than one researh tools, to clearly undestand the full picture about the research topic and also re+uire lot of knowledege and awareness of Islamic banking produts and services re+uired among the customers. 4ther issue is that customer donot deal with Islamic bank due to profitability reasons, they selected the islamic banks due to religious reason, which is more uni+ue in this sector. Islamic anks Management and oard of 0irectors also play very important role to meet the difficulties and limitations for e)perience to grow the performance and the other cause is that Islamic awakening of Muslim countries among other countries of the world is also e)perienced. 2astly we learned from this research there is difficult to turn up to this issue for changing anything in Islamic bank seperately.

DD

CHAPTER 2E>EN CONC3U2ION AND RECOMMENDATION

CHAPTER 9
9. CONC3U2ION AND RECOMMENDATION 0OR 0URTHER RE2EARCH
These recommendations and conclusion is based on the findings of this research in previous discussions.

9.1 CONCLUSION

D,

$fter all we conclude that, religious factors is very important as compared to profitablility factor, that makes customer to deal with Islamic banks. Many several reason and findings relates with customer to deal with specific bank, we concluded that, customers priorities bases is differed with different banks. In case of Islamic banks the other important factors which makes customer to deal with include followingH bank reputation and image =D1.%3;, Islamic bank confidentially =D-.-3;, confidence in (hariah (upervisory Eommittee =&,.&3;, Isalmic bank offer the same facilities like conventional bank but also follow (hariah principles =&&.'3;, social and friendly features of Islamic bank personnel =&,.93;, and location, provision of +uick and efficeint in dealing transaction, and confidence in oard of 0irectors =&-.,3;, followed by confidence in management =C,.,3;. (o we conclude that top eight factors for selecting criteria, in desending order. 4verall we conclude that, the satisfaction rate of Islamic bank customers is high. Muality services of islamic bank customers =C&.-3;, is fine that motivates the Islamic banking customer. *or finding out the degree of satisfaction or dissatisfaction among the Islamic banks, we concluded that customer perception varies in degree of satisfaction. 2ot of customer dealing with islamic banks seems to be satisfied or very satisfied with it. 2ocation is not the the top priority factor that considered by customer to deal with Islamic ank, futher we elaborated that, convience of customer is a satisfaction issue as compared with location for selecting Islamic bank. $s concerning with other issues of customer satisfaction, customers got different opnions towards their bank. "ence, the main satisfaction of Islamic descending order. Provision of easily understand bank statement =,D.D3;, employees got re+uired skills and knowledge for perform the service =DD.C3;, bank personnel neat appearence =D-.13;, employees are willing to help =&D.,3;, bank performs service accurately =&,.93;, customer are e)tremely satisfied, confidence in bank mangement =&,.,3;, Islamic bank offer wide range of services =&D.13;. "ere we conclude that, Islamic bank customers in terms of percentages, is e)tremely satisfied. ank can be summarised are followed in

D1

$fter all we concluded that the products:services offered by Islamic

ank are not well

known by customers. Islamic banking products:services like, Musana, Mudarbaha, Murabaha, Ijara and many other, are daily acceptable products:services that are practice by most of Islamic bank, e)cept the mi)ed bank where they provided. *uthermore , we concluded that, most of these product:services offerd by islamic bank customers is well aware but they donot prefer to use. "owever, relatives :friends who works in banks is not count towards important issue of customer satisfaction and dissatisfaction of Islamic anks.

9.) RECOMMENDATIONS
@esearcher finding in Ehapter & , about Islamic ank e)plained resources of Islamic ank, where they can improve their banking practices, and processes and attract majority of customer by consider other sources , on the other hand if these sources are not improved, customer rate to dealing with convential banking increases. Islamic anking in Pakistan and any where in Muslim 8orld, has got competitive advantage as compared to conventional banking, by offering services under the observation of (hariah principles. D%

Therefore , religious people gave more preference to deal with Islamic banking process. (o researcher suggested thatH 1. Islamic ank gave more priority to advertising and promotes islamic banking

products:services offered to customer. *uthermore, Islamic banking products:services provide assuranc ebout +uality services and competence. ). y improving the service +uality advice to customers.

:. *ully training provided to banking employees, for improving service +uality process for building customer relationship. =. More parking facilities providedby Islamic ank for easy access of customer. <. More attention provided individually to Islamic attention towards individual customer. 5. Islamic accounts. 9. Islamic anking Management work hard to fullfilled the customers e)pectations. !. Islamic anking provides ade+uate banking hours for attracting customer from anking Management identify the reasons for customer switch over to other anking customers. anking

management take prior action for educating and training of staff members to pay much

business community as well as regular user. . Islamic anking promoting their products:services by not promoting e)isting

commercial banking products, but bring a innovation in their product:services for attracting customers, that make them uni+ue that is not available in market.

,'

APPENDIG

APPENDIG
1". A4EB )". 4ENDERB HHHH. M:*

,1

9; EDUCATIONB

HHHHHHHHHHHHHHHHHHHHHHH.

=" ANNUA3 INCOMEB HHHHHHHHHHHHHHHHHHHH.. <" Cus1'mer a$are%ess a%d use '( di((ere%1 8r'du@1s a%d ser?i@es '((ered b- Islami@ ba%7s.

N'1 a$are '( i1 Eurrent account Time deposit account Murabaha Mudaraba Musharaka Ijara Ijara 8aktina Musana Traveller Ehe+ue Money order 4verdraft Eomputerised Machine Points =$TM;. 2etter of credit Eomputeri!ed (tatement

A$are a%d d'%I1 use i1

A$are a%d use i1

5" I( -'u ha?e a% a@@'u%1 $i1h a% Islami@ ;a%7, 1he% 8lease read ea@h s1a1eme%1s bel'$ a%d 1i@7 1he b'J $hi@h bes1 i%di@a1es h'e s1r'%#l- d' -'u a#ree 'r disa#ree$i1h i1.

21r'%#lA#ree @eligious reasons

A#ree

N' >ie$

Disa#ree

21r'%#lDisa#ree

,-

only. Profitability reasons =high return on investment; only @eligious and profitability reasons $dvice from @elatives. $dvice from friends. ank 2ocation. 2ow (ervice Eharges. ank Eonfidentially. ank Gffectiveness in Eompleting transaction. 8ide range of facilities offered by the bank. Muality advice offered by the bank personnel. ank reputation. Eonfidence in the ank board of 0irectors. Eonfidence in ank (hariah (upervisory committee. (ocial and friendly feature of ank Personnel. The Islamic bank offers the same facilities as offered by a commercial bank but ,9

Islamic bank also observes (hariaFh Principles.

9" Please i%di@a1e 1he eJ1e%1 1' $hi@h -'u a#ree 'r disa#ree $i1h ea@h '( 1he ('ll'$i%# s1a1eme%1s.

21r'%#lA#ree The Islamic bank does not offer some of the products =facilities; offered by a Eommercial bank.

A#ree

N' >ie$

Disa#ree

21r'%#lDisa#ree

,C

The Islamic bank does not offer many of the products =facilities; offered by a Eommercial bank. 4pening hours of Islamic ank 2imited.
4pening of two accounts gave me the oppurtunity to diversify my investment.

oth types of banks have a limited number of branches and opening two accounts gives access to more ranches.

!" I( -'u ha?e a% a@@'u%1 $i1h a% Islami@ ;a%7, 1he% 8lease read ea@h s1a1eme%1s bel'$ a%d 1i@7 1he b'J $hi@h bes1 i%di@a1es h'e s1r'%#l- d' -'u a#ree 'r disa#ree $i1h i1.

21r'%#lA#ree Eonvient branch location Eonvient opening hours

A#ree

N' >ie$

Disa#ree

21r'%#lDisa#ree

,&

8ide range of services Gasily undestood statement Gasy to get information Eonfidence in ank management. The cost of the service offered by the bank. Physical facilities Parking facilities Personal neat appearence. Gmployees (kill and knowledge Gmployees willing to help Individual attention 6nderstand specific needs Promise fullfilled on time Gfficiency in services for completing transaction (ervice at time

,D

$ccurate services (ervice performance (atisfaction level Meet e)pectations G)cellent (ervice +uality @ecommend to deal with Islamic ank 8ant to switch my account

;I;3IO4RAPH&
,,

;I;3IO4RAPH&
$nderson, 8.T. 7r, Eo), G.P. III and *ulcher, 0./. =1%,D;. Marker (egmentation. Eournal of Mar'etin). C'H C' P C&. $hmed .. =-''1;, 9e=elo<ment and <ro;lems of Islamic (an' , Islamic researc% and trainin) institute , Islamic development bank, 7eddah (audi $rabia $hmad, < and "aron ( =-''-;. I&erce<tions of Mala:sian Cor<orate Customers "o.ards Islamic (an'in) &roducts and Ser=ices.I International Eournal of Islamic Financial Ser=ices .9=C;. $nderson, G.8., *ornell, E. and 2ehman, 0.@. =1%%9;, >2conomic conseGuences of <ro=idin) Gualit: and customer satisfaction?, 8orking paper, =@eport %9511-;, Marketing (cience Institute, Eambridge, M$. $hmad, .iauddin, ?han, M. *ahim and I+bal, Munawar eds., =-''1; Mone: and (an'in) in Islam, Islama;adH Institute of Policy (tudies ank selection 0ecision and

,1

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