c c c Discussion

c
cccccccccccccccccccccccccccccccccccccccccccccc
c
c
c
c
cccccccccccccccccccccccccccccccccccccccccccccc
c
c
c
~slamic Banking is relatively new in UK. There have been attempts by certain financial
institutions to start and develop businesses in this niche financial services industry, but has
rather been a fiasco for many of these businesses which have eventually closed down. Trust,
Service Convenience, and Service Quality have been identified as the main causes of
failures. This research looks at some of the issues related to such failures and uncertainties.
Here it is accepted that Marketing, Communication, Promotion, Service Quality and
Customer Satisfaction are the key issue for the success of ~slamic banking in UK. An
empirical analysis is thus carried out using a multidimensional construct of modified
SERVQUAL instrument, with 11 items, introducing the new dimension of µCompliance¶,
from the CARTER model. This instrument has been employed and tested in the context of
~slamic Banking, and the problems therein related to the industry have been identified, and
addressed. Gap model has been used to highlight and address the issues, and some
suggestions relating to the strategic choice the banks have are given. ~t is suggested that
banks marketing strategies are not growing with the velocity of the growth of ~slamic
Banking in the UK, market. This tempo can be raised by employing certain marketing
techniques. ~t has also been identified that this should include both the aspect of creating a
Trust and interest between the customers and the banks. As a part of the strategy trained
staff, and increased number of bank¶s branches offering these services is extremely
important to keep the trust and interest alive in the customers of ~slamic financial services.

c 1
c c c Discussion

Ý
 



Ý Ý

  




The large scale growth in ~slamic finance and banking in Muslim countries and around the
world during the last twenty five years, can be attributed to the factors such as introduction
of reforms at all levels, particularly with respect to structure of the financial and the
economic systems, privatization, deregulations in the movement of capital resources, the
coming together of global financial markets, and the development of new and innovative
~slamic financial products.

There is a growing need for these financial services for the Muslim community residing in
UK. The ethnic groups in UK feel free and a general desire to practice their ideological
beliefs, particularly the Muslim. The Muslims in UK, with the progress in ~slamic finances
world wide, feel the need to use the banking services according to there belief. Recognizing
the potential of business, there has been attempts to provide ~slamic financial services to
Muslims in UK, by both purely ~slamic financial institutions, and big conventional high-
street banks, like HSBC, Natwest, Barclays, Lloyds TSB, etc. But more recently this
challenge has become a fierce competition among the purely ~slamic banks, and
conventional high-street banks in UK. To gain competitive advantage in this business banks
are trying to provide their customers with more and more new services.

~t has been pointed out that the competitive advantage, in general in the banking sector, and
particularly in he ~slamic Financial services, can be achieved by better service quality and
consequently by customer satisfaction. To achieve customer satisfaction one needs to know
what is customer satisfaction and how can it be achieved. To achieve this one has to measure
the service quality, based on what the customers need. There have been attempts to develop
model or framework to accurately measure the service quality. One such model is the
critically acclaimed, Gap-model, developed by the team of Parasuraman et al (1985). The
Gap-Model aims at finding the flaw or gaps in the services provided by the bank, measured
with the help of an ~nstrument developed by the team called SERVQUAL. This instrument
is used to obtain customers expectations of the services, and then based on the perception of

c 2
c c c Discussion

the management, the difference of the expectation minus the perception is obtained. This if
positive means that the customers are satisfied with the quality of the service and if found
negative then it means that the services need improvement as there is a gap of expectation
minus the perception in the service quality.


Ý 



 

Despite the hype of ~slamic banking the services are far from becoming a part of every
Muslim¶s banking practices in the UK. This can be attributed to many intervening reason
causing a drag in the rate of progress. Among these are the lack of proper marketing &
promotion/communication of these services, Lack of trained human resources in the banks
branches to provide the most general information required by the potential customers, the
general disbelief among Muslims about the ~slamicity of these services, lack of easily
accessible banks branches to obtain information or to proceed with using these services.

These issues prompt the use of SERVQUAL instrument to obtain empirical evidence that
these are among the main problems apprehending any progress, and then identifying the
gaps in the services so that gaps can be removed.

The SERVQUAL instrument has already been used successfully, on a number of ~slamic
banks in different countries, but since its implication on Conventional banks offering ~slamic
Financial service and ~slamic banks here in UK, have not been found in the literature, this
could prove to be a very useful research in improving the service quality of ~slamic financial
service.

Ý 
 


 

A comprehensive literature survey being carried out, starting from the very basic of the
~slamic financial services to underpin issues like why there is still, a disbelief among
Muslims about the ~slamicity of these services, this is followed into a literature survey of the
importance of marketing and promotion for the proper communication of these services

c 3
c c c Discussion

which can also help in eliminating the issue of disbelief. From our study of these services we
have tried to identify and address these main issues. To prove it, we have joined the issues
with the service quality feature, and therefore have used SERVQUAL as a tool, to obtain
data, about people¶s expectations and perception of ~slamic financial services. ~n the
methodology section we also describe the data analysis and the statistical tools used to
evaluate the data.

c 4
c c c Discussion








c
 
 



 


Financial institutions, financial instruments and financial markets are part of a financial
system that brings us a supply network of payment and credit, as argued by M.Y. Khan,
2001. He further points out that this system helps in transferring of funds from investors who
have excessive money to deficit sector in the market where it is required, and that the main
undertaking of the financial system is to give the capital and investment a push towards
highly efficient investment projects, thus generating attractive returns for the ~nvestors and
all the relevant parties involved in the business.

According to M.Y. Khan, 2001, generally the applicability of the ~nterest free banking
system is not accepted and for the prevailing economic system a financial system cannot
function in the absence of ~nterest. ³The ~nvestors in the economy need reward for parting
their savings to deficit units in the economy, and according to classical school, interest rate
represents the rate of exchange between present and future goods´ as argued by M.Y. Khan,
2001. ~n other words the rate of interest is the amount of money that you pay for a loan of
present value of money minus future value of money as suggested by M.Y. Khan (2001) he
further argues that ³productivity, thrift and interest rate´ are considered to be the
fundamentals of the theory of finance, according to the classical school. ³This concept is
apparently not compatible with the philosophy of profit and loss based on supply of savings
and demand for it´ as M.Y. Khan, (2001) points out. M.Y. Khan, (2001) further argues that
³Keynes school of thought´ has shown that interest rate cannot be a factor in evaluating
economic activity instead according to the school it is the ³profit and loss which guides
economic process´. This is true in the sense that even in the ³monetary framework in free
market economy´ financial institutions and other financial services providers cannot
independently determine the interest rates. ~n these institutions both demand and supply of
funds are the governing factors. ³On the other hand expected rate of profit which can be
made efficient investment and which is totally independent of the quantity or the volume of
the money, influences the interest rate structure´ as reported by M.Y. Khan, (2001) . A
review on accounting principles in ~slam by Mervyn K. Lewis (2001), states that ³~slam

c 5
c c c Discussion

commands authority over the totality of a Muslim's being, not accepting any distinction
between the sacred and the secular. Economics, politics, religious and social affairs even
accounting fall under the jurisdiction of the divine law of ~slam the Shariah´.

M.Y. Khan, (2001) addresses the economists view over ~slamic financial system that ³it is
an error of modern theory to treat the entrepreneur and user of funds as the second rate
citizen and rate financial institutions as the first class citizens working as locomotive for
development and growth´. However M.Y. Khan, (2001) argues about the fact that actual
capital is the human capital, and not the finance, indeed it is an important element of the
business, so it can be called potential capital. Thus in a way we can say that the potential risk
is clung to the entrepreneur and his actions to the use of finance. ³~n such a system,
mobilising resources and/or creation of liabilities by ~slamic banks on one hand and
utilisation of these resources or financing of assets on the other hand´ are of utmost
importance, as pointed out by M.Y. Khan, (2001). So the major liabilities of ~slamic banks
hover around current and investment deposits.


 




 




~slam has become a ³global phenomenon and its influence on society and economy´ is
ubiquitous now, as Ramin & Kwon, (2000) reports that, ³~n Africa over 40 percent of the
population are Muslim, in Asia over 20 percent of population and 4 percent of the European
population is Muslim, in the US over 4.8 million Muslims live and the number is growing
rapidly. Altogether 1.3 billion Muslims live in 184 different countries, which are about 20
percent of world population´. He further argues that Muslims have been managing their
daily finance, trade, and businesses under the guidelines laid in by ~slam stressing on
³equality in wealth distribution and shared responsibility´ for all involved in the business,
and as Ramin & Kwon (2000) reports that it is highly discouraged in these societies to do
businesses wherein result are uncertain and therefore expecting prearranged profits from
businesses of capital transactions.

Mabid, and Munawar (2001) describe that there are ³two groups´ in an economy, ³investors
or the entrepreneurs and the savers (capital surplus group)´, and every economic system is

c 6
c c c Discussion

run by mobilizing funds from capital surplus group to the entrepreneurs. Mabid, and
Munawar (2001) argue that this mobilization of funds is carried out by a process called
³financial intermediation´ in the markets; and banks are the major players in the market of
financial intermediation. Mabid, and Munawar (2001) argues that the services of the ~slamic
banks are more implicated in the investment projects, where the ³equity and the working
capital needs´ of the projects are taken into consideration. They also argue that the economy
and the prevailing financial system based on interest is also affected by the sudden variations
in the external conditions, and either way the interest bearing system, with its ³fixed rate of
returns´, only allows the ³banks and the savers of money to get away without bearing any
amount of risk or loss´ faced by the entrepreneur.

Muslims and non-Muslims show a mix of ³similar and dissimilar attitudes towards ~slamic
banking´, as a reported by Gerrard & Cunningham (1997). Haron S. et al (1994), studies on
the customer preferences show that, both Muslims and non-Muslims generally are not
familiar with of the culture of ~slamic banking. Also both groups display different behavior
towards ~slamic banking, with the amount of difference depending on the ³nature of the
respective matter put to them´. Haron S. et al (1994) have identified that Muslims have a
³desire of profit´ without the element of interest in it, on the other hand for non-Muslims
there are no preferences, however both groups show a concern for the ³issue of moral
hazards´ associated with profits obtained from interest.


 








Predominantly in most ³Anglo-Saxon countries, commercial banking dominates´, while in

countries like ³Germany, Switzerland, Netherlands, and Japan, universal banking´ is the
dominating system as reported by Mabid and Munawar (2001).

According to Mabid and Munawar (2001) ³Commercial banking is a pure´ form ³financial
intermediation´, where banks take money from savers at a certain rate of interest and then
lend the money to capital deficit sector or individuals at a higher rate of rate of interest and
thus making there own profit by this process of intermediation. They further report that these

c 7
c c c Discussion

Commercial banks are allowed to provide ³services like letter of credit and guarantees´ but
are legally not allowed to involve in trading. Mabid and Munawar (2001) also argue that in
Commercial banking operations money borrowing enterprises or individuals have greater
understanding of their business than the banks, this highlights the issue of moral hazard
which is that these borrowing entities can hide information and give false-report of their
financial turn-outs. These circumstances have been partially sorted out by the use of credit
rating system. Mabid and Munawar (2001) further analyze that µUniversal Banks¶, on the
other hand ³can hold equity´ and can do trading. Because Universal banks do finances by
³shareholdings and lending´, they have their representatives involved inside the business
being financed, this helps in monitoring the business, thus the universal banks have a better
chance of ³dealing with the information asymmetry´, that may cause them bad debts.

Mabid, and Munawar (2001) points out that ³Many ~slamic modes of finance involve
trading´, however universal banking rules or the commercial banking rules are not
applicable on ~slamic banks. ~nstead ~slamic banks launch ³trading companies that finance
the credit purchase of commodities as well as assets´. This explanation however makes
~slamic banks look some what like Universal banks as is argued by Mabid, and Munawar
(2001).

Mabid, and Munawar (2001) argue that ~slamic banks can be described as ³deposit-taking
banking institutions´, which carry out all the activities of ³currently known banking system´,
however where the inclusion of ~nterest is prohibited in any service or in any form. ³On the
liabilities side, it mobilizes funds on the basis of a Mudarabah or Wakalah (agent) contract.
On the assets side, it advances funds on a profit-and±loss sharing or a debt-creating basis, in
accordance with the principles of the Shariah (~slamic Law)´, as is argued by Mabid, and
Munawar (2001). The important differences that distinguish ~slamic Banks from the
conventional banks are that these bank give no guarantee of the invested or deposited capital,
or of any return or profit on any investment, these banks just ³provide professional
~nvestment management services´, investing in Halal investment as reported by Mabid, and
Munawar (2001), they further argue that these bring a striking similarity between ~slamic
banks and investment companies. However, as Mabid and Munawar (2001) point out that

c 8
c c c Discussion

³there is a fundamental difference that the investment companies sell their capital to the
public, while ~slamic banks accept deposits from the public´.

Thus as argued by Tarek S. Zaher and M. Kabir Hassan, (2001), from the frame work of
³paradigm version of ~slamic Banking´, it can be said that ³~slamic banks operating on
system of PLS´ basis are prepared to sustain any financial defaults/shocks or losses. ³These
~slamic banks have the ability to reduce the capital value of investment deposits in the case
of loss. Also ~slamic banks are not expected to reduce credit risk by systematically requiring
collateral or other guaranty as a prerequisite for granting PLS facilities´ as is reported by
Tarek S. Zaher and M. Kabir Hassan, (2001).


 








Mabid, and Munawar (2001) argue that ³~slamic banks are also companies´ whose main
functions are intermediation of finance or investments by taking money from lenders and
giving it to borrowers like entrepreneurs. There are different mode of contract (explained in
Appendix ~~) or financial contract (agreements) used by ~slamic banks to lend or to borrow
money, compatible with the Shariah (~slamic Law), as argued by Mabid, and Munawar
(2001) they further argues that in contracts of ³resource mobilization of funds´, the net
profits that the bank makes through managing the funds, ³is shared between shareholders
and the investment deposit holders according to a prearranged profit sharing formula´,
however the loss is shared in the ³same proportion to the capital contributions´ made by all
participating parties. Mabid and Munawar (2001) reports that ~nvestment deposits are taken
as ³general investments´ as these add up in a ³pool of investment funds´. Apart from this
~slamic banks take, Current Accounts that act as ³interest-free loan for the banks´ as
reported by Mabid, and Munawar (2001), also for the current accounts the ³bank guarantees
the principle´ amount but is not liable to pay any profits, however still Banks have the right
to ³use these deposits at their own risk´.

c 9
c c c Discussion

The structure and banking procedures of ~slamic banking does not entirely matches those of
conventional or universal banking, despite the fact that a ³hybrid of commercial and
investment banking services´ are offered as reported by Rifaat, (2001).

 


 





Rifaat (2001), have also recognized that so far the ³authorities in the countries in which
~slamic banks operate have not appreciated the implications of the unique characteristics of
~slamic banks´. Errico and Farahbaksh (1998) have pointed out that until recently the issue
of ³what standards of conventional banks should apply to ~slamic banks has received little
attention. So far there are no particular banking regulations that apply specifically to ~slamic
Banks. With some degree of changes in terminology, the prudential regulations for
conventional banks have been adopted for ~slamic banks´. Errico and Farahbaksh (1998)
also argue that majority of the governing ³prudential regulations of conventional banks´ are
used in somewhat modified versions, in the running of ~slamic banks, all modifications
pertain to the core philosophy of the ~slamic banks, i.e. ~nterest free banking and trading.
Still however, ³the implementation of banking supervision for profit sharing banks differs
slightly from those of a conventional bank´ as is pointed out by Joyosumarto (1995). Even
still all of the conventional regulation cannot be applied to the ~slamic Banks as have been
argued by Dale, (1997) and Karim, (1996b) that there are ³concerns about the implication of
applying the Basle capital adequacy ratio to ~slamic banks´. And there are still other issues
of ³whether investment accounts should be defined as a bank deposit or as investments in a
collective investment scheme´, as argued by Ainley, (1997).

 










As Munawar ~qbal et al (1998), points out that ~slamic banking is a new banking system, and
is still in its budding stage, and it has the potential to serve the 1.6 Billion Muslims in the
world, as there is no doubt that Muslims would ideally want there money to be with banks or
financial institutions that comply with their religious laws, and still provide them with
returns on their investment. As Munawar ~qbal et al (1998) points out that a wide range of

c 10
c c c Discussion

modes of financing and investment of the ~slamic financial system are now available in
different parts of the world according to the demands. ³Theoretical arguments and models
developed by ~slamic economists and the successful practice of hundreds of institutions in
heterogeneous conditions both testify to the viability of ~slamic banking. The average
growth rate of deposits in ~slamic banks over the past twenty years has been over ten percent
per annum´ as reported by Munawar ~qbal et al (1998).

As Mabid, and Munawar (2001) points out that a clear demonstration ³of the success of
~slamic´ financial services or ³banking is the fact that many conventional banks have also
started´ offering banking services that comply with ~slamic banking laws ³in the conduct of
their day to day businesses´, also that these conventional banks are particularly competing to
capture markets ³predominantly in Muslim regions´. As an observer of ~slamic banking
Wilson Rodney, (1990), made a significant remark that ³The present engagement of many
conventional commercial banks in providing ~slamic banking services to their clients is a
cogent evidence of the success of ~slamic banks´

³The diversification trend has moved to US and to Europe and ~slamic banking is becoming
stronger industry which is not just a niche financial services industry, but is a niche market.
Many bankers predict that ~slamic banking could be responsible of over 50% of savings in
the ~slamic countries in the next decade´ as reported by Tarek S. Zaher and M. Kabir
Hassan, (2001), they also suggest that as a consequence on a ³global´ scale, ³large financial
institutions have recognized this trend´ and are fast bringing the changes within there
systems to capture this new ³attractive niche market´. As Tarek S. Zaher and M. Kabir
Hassan, (2001) reports that some ³western conventional banks have already established
dedicated ~slamic banking facilities or services, include Citibank, Bank of America, standard
chartered, Barclays, Nat west, HSBC, Lloyds TSB´, etc. However Tarek S. Zaher and M.
Kabir Hassan, (2001) argue that ³despite the advances by the western banks and investment
companies, the mainstays of ~slamic investment continue to be the ~slamic banks
themselves´. There is a growing number of ³non-Muslim participating in ~slamic banking
because they consider it to be commercially sound investment´ as is reported by Brooks
(1999).

c 11
c c c Discussion

 
 





~n its present state ~slamic banking is seen to deviate in many important ways from its ideal
paradigm version, again some of the underlying reason reported by Tarek S. Zaher and M.
Kabir Hassan (2001), can be briefed as under;

1.c All saving deposits and investments accounts are always ³explicitly or implicitly
guaranteed´.
2.c The PLS principle is never stringently employed. There are cases that the ³banks
have guaranteed expected rate of return on investment deposits´. ~n some other cases,
it is only faked with ³partial implementation of the PLS principle through complex
formulas´.
3.c Most of the ³financing is carried out through non-PLS modes´.
4.c ~slamic banks have the right to use a ³degree of discretion about the need of
collateral´ before financing or providing any facility to the clients.

~n a struggle to legitimize certain element of forbidden banking in ~slamic banking, ³many

banking operations of some ~slamic banks´ have detracted from the core business
philosophy of ~slamic banking. ³Moreover, PLS modes of financing have been made similar
to non-PLS modes through the reduction of their risk element´ as reported by Tarek S. Zaher
and M. Kabir Hassan, (2001). Research by Aggarwal and Yousaf (2000) suggest that ³most
of the financing provided by the ~slamic banks they examined´ in their studies ³do not
conform to the ~slamic principle of profit and loss sharing, and instead much of these
financing activities are offered through debt like instruments´. They have also found that
³~slamic banks rarely offer long term, financing to entrepreneurs seeking capital´. Similar
findings have been made else where, and supported by the work of Metawaly (1992) and
Pourian (1995).

As argued by Tarek S. Zaher and M. Kabir Hassan, (2001), ~t can be said that for ³all
practical purposes ~slamic banking is currently carried out in a hybrid way´, appropriately
³between paradigm version and conventional banking´. They further argue that ³the degree

c 12
c c c Discussion

of divergence from the paradigm version is specific to each country where ~slamic banking
principles are followed and need to be assessed on a case by case basis´. Muhammad Anwar,
(2003) have found that ³the activities of ~slamic banks have been found to reflect the
conditions of the country in which they are based´. Another interesting study, by Rosly &
Bakar (2003) confirms that ³~slamic banking that thrives on interest-like products (e.g. credit
finance) is less likely to outshine mainstream banks on efficiency terms. These ~slamic banks
although claim the services, like ~slamic credit finance products, to comply with Shariah
rules, but their lack of ethical content is not expected to motivate customers to strive for
efficiency through scale and scope economies´.

Some author¶s suggestions and implications have also lead to a general disbelief in the
society for ~slamicity of ~slamic finances.
³Muslim¶s efforts at development suffer from the
common practice of double book keeping´ as suggested by the criticism of Timur Kuran
(1995), he also criticizes that ³significantly more and more ~slamic banks that have gone into
operation in dozens of countries consider it imprudent to engage in genuine profit-and-loss
sharing. As the executives of these banks understand, that under the prevailing Standards of
Honesty and Trustworthiness a genuinely and fully interest-free banking system´ cannot
work. Timur Kuran (1995) further criticize the work of ~slamic banking scholars by stating
that ³Most of the so called scholar are doing nothing but effectively transforming ~slamic
economics into an application of general equilibrium theory. ~slamic banking has indeed
made a positive contribution to many economies. ~t has stimulated national and international
trade, and brought some dormant deposits into economic circulation. But scholars who have
studied the practices of ~slamic banks generally recognize that they are anything but interest-
free. The banks give and receive interest as a matter of course, though usually in concealed
form. There is nothing inherently ~slamic about their operations.´



 







 


A wide range of problems and challenges need to be addressed before the formulation of a
long-term strategy for banks operating in non-Muslim countries offering ~slamic financial

c 13
c c c Discussion

services as argued by Tarek S. Zaher and M. Kabir Hassan, (2001), and some of these issues
and concerns as pointed out are as follows:

1.c ³A uniform regulatory and legal framework that is supportive of an ~slamic financial
system has not yet been developed´. ~n the absence of such a framework further
enhancement of the integration of ~slamic markets and international financial
markets, is not possible or at least a distant dream.
2.c There is dire need of regulated ³accounting procedures´ and standards that are
consistent with the Shariah (~slamic laws).
3.c These financial institutions also have a ³shortage of trained personnel who can
analyze and manage the portfolios, and develop innovative products according to the
~slamic financial principles. As only a limited number of financial institutions can
afford to train their staff and deploy resources in product development´.
4.c ³Another problem is that many people do not understand ~slamic banking´, and there
are very ways in which they can obtain any knowledge of the services.

Simon Archer et al have also pointed out towards an important issue that ³~slamic
investment account raises a set of issues concerning the contractual relations between the
bank and the holders of such investment accounts. Under present contractual arrangements,
investment account holders depend unduly upon vicarious monitoring by or on behalf of
shareholders, a situation aggravated by current shortcomings in financial reporting and
limitations of the scope of external auditing´. They suggest a ³change in the accounting
regulations is extremely necessary for such business to expand, and specially Muslims to
have faith in such transactions.´

c 14
c c c Discussion








 

!

 
 



 Ý


³The increasing organizational and social influence of the marketing function and its
associated practices is seen by many to have been evident since the 1960s, as technologies of
power, developed in the field of psychology and socio-psychology´ were adapted and
implemented in a business context, as is identified by Rose (1999). ³Marketing draws
largely on the disciplines of sociology and psychology as it integrates large scale
demographic/ economic surveys and focused motivational/ attitudinal research to achieve a
social mapping of desire´. The segmentation of the masses based on the consumption pattern
is one of the core constituents in the process of marketing (see knights and Sturdy (1997)).
Knights and Sturdy (1997) also argue that ³organizations are increasingly rejecting mass
marketing in favor of a more Customized, Authentic, and Personal approach, frequently
possible through the employment of the latest advances in information technology.
Traditional marketing techniques are too blunt an instrument and consumers are increasingly
likely to look further than the truth claims of advertising campaigns.´

As Damian Hodgson (2002) have pointed out that the financial service industry in UK has
been ³among the forerunner in the application of marketing techniques to the newly
constituted marketplace, frequently following the lead of other service industries such as
supermarkets´. The clear objective, with the quote ³Know your Customers´ here is that ³it
should be the responsibility of the institution to become familiar with the financial affairs of
its clients to prevent them from miss-selling them wrong services´.

A survey by Bird (1997) reveals that ³50% of the bank¶s value typically comes from the top
3-5 % of its customers, while 60 to 80% of its costs come from the bottom 20%´. Banks tend
to loose most of their ³profitable customers to competitors, while being left with their most
costly customers´, as is pointed out by Mark, (1999). The lack of proper marketing strategy
is argued by Roger (1993) that ³many retail banks are more products oriented than market
driven, and suffer from insufficient collaboration and teamwork, low performance standards

c 15
c c c Discussion

and minimal investment in training and personnel development´. And as Mark (1999) points
out that with a minimalist importance given to marketing ³banks face considerable
challenges in becoming more customer oriented and market focused´.

~n the wake of ~slamic banking, the high street banks in UK in particular are facing new
challenges, uncertainties, and unlimited opportunity, as is pointed out by Mosad Zineldin
(1996), at the same time he argues that ³no bank can offer all products and/or services and
be the best/leading bank for all customers. They are forced to find a new basis for
competition. A bank must examine its strengths and opportunities and take a competitive
position in the competitive marketplace. There are a number of ways in which distinctive
competitive positions can be developed and maintained.´ Mosad Zineldin, (1996), also
suggests that a ³key way to building a strong competitive position is through product/
service differentiation which creates a clear image of the bank and its products/services in
the eyes and minds of customers. Strong competitive positions can be maintained by
building barriers to competitive action by various means´. E.g. hiring, developing and
holding the skilled staff or reducing employee turn over, this should provide help in ³dealing
and treating customers positively, with respect and with the highest ethical standards´.
Mosad Zineldin (1996) further argues that another big issue is that a large majority of the
banks have a very little exposure of ³marketing to multicultural communities´ and as he
points out that, these banks have no experience of marketing to a ³Muslim community´.

"#$%$"&$&'( With the help of positioning banks can craft a distinctive character in them that
helps them to distinguish themselves from other competitors i.e. by concentrating on a
certain market segment and finding a lead in that segment. ~t also means to attain a clear and
unique position in the market place for the bank, as argued by Mosad Zineldin (1996), he
also argues that ³the image-making bank seeks to cultivate an image in the customer¶s eyes
and mind´.

As Kotler (1994), recognizes that ³positioning in a competitive and aggressive market´ tells
us about the perception of the customer¶s view of the ³product¶s or organization¶s
performance´ based on the features specifically in comparison to that of the competitors.

c 16
c c c Discussion

This implies that banks should constantly strengthen or adjust customer¶s perception or
image. ³Positioning plays a pivotal role in marketing strategy, since it links market analysis,
segment analysis and competitive analysis to internal corporate analysis´ as suggested by
Mosad Zineldin, (1996), he further points out that in terms of banks, positioning means that
how do banks want to appear to its customers and the potential customers, how is it valued,
and what kind of the image it has. He further elaborates that positioning would help in
classifying that whether the bank is a local bank, a large bank, a global bank, a friendly bank,
or a niche bank etc. So individually banks can make there position and can earn better return
or profits no matter what the prevailing average profitability is within the market in
comparison with its competitors in the same market. Mosad Zineldin, (1996) also suggests
that ³competition and profitability pressures mean that banks must be increasingly
responsive to market considerations in terms of their positions, management and market
strategies, their internal and external infrastructure, their use of information technology, and
their ability to innovate and differentiate´.

Naser & Moutinho (1997), have identified a shift of ~slamic financial services from purely
~slamic banks towards western conventional banks. They also recognize the importance of
an effective Marketing Strategy, as a major tool in gaining competitive advantage over the
others. This strategy comes as a tool because of the psychological image of ~slamic finances
on the ~slamic community.
This is because that both ~slamic banks and Western banks are
disposed to change their activities to comply with the ~slamic Shariah principles. There
research has evaluated the effectiveness of the marketing strategies by drawing quantitative
information from a sample of ~slamic banks from among a list of the top 100 Arab banks.

)*+%$"&#,$-
+./)%$&'(
Marketing theory has generally been associated with acquiring
more and more customers or creating a business transaction. Berry (1983) contends that
marketing is very important tools for services based products, to protect the customer base.
Gronroos, (1990, 1994) suggests a relationship definition of marketing: ³Marketing is to
establish, maintain, and enhance relationships with customers and other partners, at a profit,
so that the objectives of the parties involved are met. This is achieved by a mutual exchange
and fulfillment of promises´. Gronroos, (1994) further suggests that these relationships are
considered long termand in other words loyal, most of the time, and so we can say that the

c 17
c c c Discussion

³profitability of relationships is one of the key goals of marketing´. Gronroos (1994) further
concludes that ³~n a relationship perspective the focus is not on service encounters (or
transactions) as such. The encounter is rather seen as an element in an ongoing sequence of
episodes between the customer and the service firm. Thus marketing, service quality, and
customer satisfaction needs to be analyzed both on an episode level and on a relationship
level. Second, relationship marketing tends to be more focused on keeping customers and
enhancing the relationship with them´. But according to argument of Fornell, (1992); Fornell
and Wernerfelt, (1987), the purpose of the offensive marketing is to get new customers and
also increasing sales while defensive marketing is concerned with reducing the loss of
customers to competitors. The main issue is that the ³cost of obtaining a new customer´ goes
beyond and is more than the ³cost of retaining an existing customer´. Fornell and Wernerfelt
(1987) argue that in stagnant marketplace organizations compete for dissatisfied customers.
So effect of the offensive marketing is to capture the ³competitor¶s dissatisfied customers´,
whereas defensive marketing is used to manage and bring back the loyalty of the existing
dissatisfied customers.

Fornell (1992) has further extended the argument to how to relate satisfaction to share in the
market and profitability. He recognizes that customer satisfaction is related to the future
profits of the company. Customer satisfaction can be considered as an additional and an
important element of performance measurements along with return on investment, market
share and profitability. Fornell (1992) argues that a defensive strategy is composed of two
constituents, ³customer satisfaction and switching barriers´. ~t is the ³switching barriers´
that make it expensive for customers to move to others. As Fornell (1992) points out that
³different types of costs (search costs, learning costs, emotional costs), cognitive effort and
risk factors (financial, psychological, social) constitute switching barriers from the
customer¶s point of view´.

~t is also known that to increase the strength of a relationship commitment of the customers
is very important a factor. Liljander and Strandvik (1993b) conclude that commitment and
loyalty are conceptually related to each other, despite the fact that they both have a different
origin. Loyalty is usually defined in terms of observed purchase behaviour however

c 18
c c c Discussion

Liljander and Strandvik (1993b) have defined loyalty as ³repeat purchase behaviour of the
customer within a relationship´.

Kaj Storbacka et al (1994), developed a model which is a leap into the theorizing
³relationship quality and profitability´. ~t serves two important purposes; firstly, by adding a
³dynamic perspective to service quality´, also identified by Gronroos (1993), and secondly,
it combines service management and its concept of ³perceived service quality to relationship
marketing´. ~t is also important to know that successful relationship marketing depends on
value addition, through different kinds of service, along with the main business offered to
customers and clients, and this is not possible without an understanding of management of
services. Kaj Storbacka, et al, (1994) further suggests that ³without an understanding of how
to manage the quality of services in customer relationships on a long-term, dynamic basis
the firm will not be able to make full use of the competitive advantage opportunities offered
by a relationship marketing strategy´.


 





The objectives, and the implementation & management of marketing communication is the
same for services as it is for any other product. The intangibility of the Service products
causes a particular difficulty in terms of its communications. A simple solution is to deliver
promotions in terms of the physical evidence of the services. The ³word of mouth
communication´ is associated with promotions and is extremely important. However,
customers can build their own image, impression, and expectations of the service from the
marketing communication messages. Because of the intangibility of the service products, the
judgment of service quality becomes more subjective, and these judgments are based on a
³comparison of prior expectations with actual perceived outcomes´. At the heart of the
delivery of any service product is the service contact between the service provider and the
customer. This is also known as ³interactive marketing´. This feature of service is an
important evaluating factor of service quality as it combines all the constituents of services
marketing mix and is recognized as the focal point of how a product or a service is formed or
delivered to the customers.

c 19
c c c Discussion

 

 

Customer satisfaction is recognized as the ³feeling or attitude´ of an end user for a product
or service, following the experience as defined by Solomon (1996) & Wells and Prensky
(1996). According to Drucker (1954), the main purpose of any business is to ³create satisfied
customer´.
And
profitability increases with increasing customer satisfaction as argued by
Anderson, Fornell, and Lehman (1994). A satisfied customer purchases the product or
services again and will normally have a positive opinion about it conveying it to others as
argued by Anderson and Mitall (2000), Dispensa (1997)). By contrast, a ³dissatisfied
consumer is more likely to switch to an alternative product/ service the next time he/she
recognizes the same need. Not 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´, it is
therefore very important for the firms and organization in any business to make sure that
their products or services produces satisfied customer. This has increasingly led to
measuring customer satisfaction in the recent past as argued by Gulledge (1996). Banking
industry has also attracted much of the attention of many researchers in regards of customer
satisfaction (for example, Anderson et al., 1993; Bedall and Power, 1995; Brenhardt et al.,
1994; Dispensa, 1997; Holliday, 1996; Wells and Prensky, 1996; White, 1994). Bartell
(1993) & Haron et al. (1994) reports that the reason is the sudden rise in extreme
competition among banks to find their competitiveness and position. Customer satisfaction is
rapidly becoming a core element in bank¶s marketing strategies. The widely used term,
"after-marketing means focusing attention and efforts on current customers in order to
maximize customer satisfaction, so to secure their retention´ as argued by Vavra, (1995).
Retaining customer has become a major concern for many banks, for example, Lloyds Bank
(UK) has conducted a ³research to identify the process leading from customer satisfaction to
account closure and to explore the determinant factors of dissatisfaction. The findings from
this study have helped Lloyds in designing and implementing a new customer retention
process´ mainly reported by Waterhouse and Morgan, (1994). The National Bank of
Middlebury (USA) has also developed a ³quality service program based on customer
retention through service quality´. Also the Royal Bank of Scotland has been employing
customer satisfaction procedures in designing a future plot for their strategic vision. The

c 20
c c c Discussion

bank strives to preserve ³profitable customer behavior´ in terms of the ³3 Rs: emaining
with the bank, eferring the bank to friends, and epurchasing from the bank´ as identified
in ~JRDM (1995b). ~n other word banks are constantly changing and altering their
techniques and tool, like reengineering of all services to focusing on only specific services to
achieve customer satisfaction from their businesses as reported by Motley (1994). Sion
(1994) recognizes µtelemarketing¶ as a considerably better means of customer satisfaction.
White (1994) research focuses on the effects of telemarketing, in satisfying customers, he
reports ³telephone banking´ as key element of services for achieving customer satisfaction.

~t is clearly a fact now that customer satisfaction is the key element in developing strategies
for the banks. Thus it is essentially important for banks these days to change their strategies
from ³managing means to managing customers´. At the same time it is vital for banks to
develop the management systems to continuously measure and satisfy customers as argued
by Chakravarty et al., (1996), Chitwood (1996), Morrall (1996), Noe (1996), Romano and
Sanfillipo (1996).

³Good Quality helps in market expansion and gaining market share´ as is argued by Buzzel
and Gale, (1987). Service literature stresses the significance of quality perceptions and the
relationship between service satisfaction and quality as the works of Cronin and Taylor
(1992) & Taylor et al. (1994). Keiser (1993), & Lian (1994 a, b) have found the relationship
that good service quality is the basis for customer satisfaction and helps in increasing
customer base (increasing loyalty and bringing new customers. Mahoney (1994) has
identified financial institutions going beyond service quality, by brining in distinctive service
features like ³service excellence´. Masden (1993) defines µservice excellence¶ as grounds
specifically aimed at making happy & cheerful customers to go beyond the expectations of
the as he points out that ³service excellence concentrates on listening, empowerment,
innovation, and making customers and employees part of the action´.

c 21
c c c Discussion

 


 


The customer¶s preferences have been extensively studied, in their selection of Banks, by
many researchers. (Anderson et al., 1976; Evans, 1979; Haron et al., 1994; Hegazy, 1995;
Kaynak and Yavas, 1985; Javalgi et al., 1989; Khazeh and Decker, 1992; Laroche et al.,
1986; Ross, 1989). ~n this regard methodology of using the questionnaires in measuring and
evaluating the relative importance of features that affects the selection of banks have been
studied extensively. Metawa and Almossawi (1998) report some of the critical features
including: ³availability of credit, recommendations of friends or relatives, location of the
bank, number of services being provided by the bank, the quality of services, easy
availability of cash machines or ATMs, banking hours, return on investment, affability of
bank¶s staff, understanding of individual financial needs, services for women, and bank¶s
popularity and image´. Metawa and Almossawi (1998) argues about the ³relative
significance´ of the individual features with respect to the markets, and points out that the
importance of one feature in one market is different in other markets and this difference
becomes even more significant for ~slamic banks, and demographics variability of
customers. At the same time the bank selection features for ~slamic banks that are crucial in
its selection may not important at all for commercial banks, as reported by Hegazy (1995).
Hegazy (1995) further argues that ³in the selection criteria of ~slamic banks, the most
important factor has been found to be the advice and recommendations made by relatives
and friends´ as reported by Metawa and Almossawi (1998). They further report
³Convenience of location, friendliness of personnel, and the bank¶s vision of serving the
community regardless of the expected profitability, timeliness, and efficiency were also
found to play important roles in the selection of ~slamic banks´. Metawa and Almossawi
(1998) suggest that identification of main selection criteria for banks can greatly help in the
developing of marketing strategies for banks. They also suggest that ~slamic banks
functioning on the rules of profit-loss sharing (PLS) should develop competitive advantages
by investigating on their behaviors.

Some researchers like Allred & Addams, (2000) have identified that ³neither banks nor
credit unions do a good job of surveying customer needs or retaining customers´. Allred &

c 22
c c c Discussion

Addams (2000) survey has revealed that about ³50 percent of total banks customer have a
tendency to leave one financial service provider because of poor service performance´.


Jabnoun, & Khalifa (2005) has developed regression models for conventional and ~slamic
banks, and have done Factor analysis on the survey data. The factor analysis has ³resulted in
four dimensions: personal skills, reliability, values, and image´. Regression analysis
provides evidence for the significance of the four dimensions, which can effectively measure
service quality for conventional banks. Jabnoun, & Khalifa (2005) have also report that of all
the dimensions ³values and image´ were found to be most affecting than others. They also
report that for ~slamic banks ³only personal skill and values´ are the significant dimensions.


 
 
!

Since the constituent factors involved in determining service quality differ from one country
to another, Jabnoun, & Khalifa (2005) argue that developing relevant and applicable
measures in quantifying service quality are critical for different countries and cultures. They
further emphasize on the importance of ³customized measures of service quality´ for a
particular regions and countries.

Blanchard & Galloway, (1994) report that Quality of service is fast becoming a key factor in
differentiating among the many players in the financial services sector in UK, and these big
guns are among the first in taking the initiative to develop and employ quality management
systems. With respect to the current trends a lot of research is focusing on issue of defining
³Service Quality from a cognitive perspective´ as is reported by D. Bailey (1991).

Metawa and Almossawi (1998) in there study have found that employee of ~slamic banks
have obtained the ³highest satisfaction score among the elements of the service delivery
system´, and for customers of ~slamic financial services the ³two most important bank
selection criteria were adherence to the ~slamic principles, followed by the rate of return´.
From a study, carried out by Al-Tamimi & Al-Amiri (2003), comparison between two or
more ~slamic banks revealed that there isn¶t much of a difference of service quality among

c 23
c c c Discussion

them, and for these banks dimension of µreliability¶ was the most important one in the
applied SERVQUAL ~nstrument. But the differences exist within the demographic
variations. Naser & Al-Khatib (1999) have reported that customer awareness and satisfaction
for ~slamic banks is very limited in a country like Jordan, their research reveals satisfaction
and dissatisfaction, for the facilities and products provided by the ~slamic banks.

Service quality measurement has been a hot topic in debates and literature, over the past
years. A focal point of a major argument among Cronin and Taylor (1992, 1994),
Parasuraman, Zeithaml & Berry (1994), Teas (1993, 1994) has been about the measurement
of service quality either as perceptions or as disconfirmation (i.e., the difference between
perceptions and expectations). Cronin and Taylor (1992) favouring the perception approach
have suggest that ³perceptions of service quality more closely match customer evaluations of
the service provided´. Parasuraman, Zeithaml, and Berry (1994) have responded suggesting
that disconfirmation approach as a better method for measuring service quality, they argue
that disconfirmation helps service providers, in revealing quality or service gaps in the
service being provided. Brown, Churchill, & Peter, (1993) and Peter, Churchill, and Brown,
(1993) have identified another problem with the disconfirmation approach their argument is
that measuring expectations and perceptions are separately, the difference of scores for
disconfirmation show ³problems of reliability, discriminant validity, and variance
restriction´. These researchers also suggest direct measures of the perception and
expectations scores can help in eliminating the problems related to measurement.
Parasuraman, Berry, and Zeithaml (1993) argue for dependability and legitimacy of the
³difference score format´ in the measurement of disconfirmation. However, Parasuraman,
Berry, and Zeithaml (1991) invite further examination and evaluation of the ³two-part
measures versus the direct disconfirmation measures´. Another issue in relation to
measurement is about suitability of service quality being measured, whether on ³cross-
sectional´ design or on ³longitudinal research design´. A longitudinal design is the
measurement of expectations preceding the delivery of service and obtaining the perceptions
after the delivery. However it is still unclear from the literature qualify any approach, i.e.
whether a cross-sectional design is more suitable or a longitudinal design. Still cross-
sectional research designs have been exercised by both disconfirmation group and the

c 24
c c c Discussion

perceptions group in the measurement of expectations and perceptions. Boulding et al.

(1993) report a study where they have measured expectations prior to the delivery of service,
their study involve the use of computer simulation with a hypothetical data, which raises
questions about the practicality of the findings. Pratibha A. Dabholkar et al, (2000) stress on
the importance of finding the results for longitudinal design compared to cross-sectional
design in real time practice to evaluate the actual expectations of customers prior to the
delivery of service.

~acobucci et al. (1994) have identified a number of similarities between the two constructs of
service quality and customer satisfaction. Parasuraman et al. (1985) have originally
suggested customer satisfaction as specifically based on situation and/or encounter, and
quality as a more holistic thing, which takes a long time to develop, but they did not support
it with any empirically driven evidence.


 



Gap model is considered to be the hub of the service quality research ³Gap´ Model of
Parasuraman et al (1985), is illustrated in Figure 1, this is a simplified version of the µGap¶
model, as given by ~acobucci, Dawn, et al (1996). The model is similar in construct and
design with that of the Churchill and Surprenant¶s (1982) disconfirmation model, there are
however some distinctions, as is reported by ~acobucci, Dawn, et al (1996). ~n the gap
model, as in figure 1, the rectangle represents consumer¶s expectations before experiencing
the service itself; the oval represents the service perceived by the customer; the curved box
represents the ³Gaps´ in the service being provided, and finally the diamond shape
represents the judgment of service quality by the consumer. ~t is expected that Consumers
will compare their experience of the service or product with the expectations that they had
prior to their experience and this assessment provides for the ³consumer¶s perceptions of
service quality´. ³Unlike other models of service quality, there are no hypothesized direct
effects of expectations or perceived service on service quality, a there is no interaction
thought to occur between these, indirectly, casual determinants´, as is reported by ~acobucci,
Dawn, et al (1996). The ³Gap´ model is the leading model of service quality determination

c 25
c c c Discussion

and has been vastly employed in a large number of studies as reported by Boulding et al.
(1993), Cronin and Taylor (1992), ~acobucci, Grayson, and Ostrom (1994), Yi
(1990).
Performance of Gap Model has been studied in a variety of different situation including
which also includes Banks, as reported by Brown and Swartz (1989). The gap model has
also been found to be prominent in its use in businesses, and its measurement instrument,
SERVQUAL, discussed below, is one of the most widely used tool of service quality
measurement as reported by Cronin and Taylor (1992).

:-);%)3
).4$;)
).;)$4)3
).4$;)

+-

).4$;)


!0+*$%<

$'0.)
Ý(
$1-*$2$)3
4).#$"&
"2
+.+#0.+1+&
)%
+*
5Ý67
8 +-9
1"3)*

c 26
c c c Discussion

Figure 2, below illustrates the original version of the model, developed by Parasuraman et al
(1985). Their model identifies five opportunities for quality failure, ~dentified as ³Gaps´,
which are perceived as a process for the design of the service.

Gap one: Customer expectations

0#%"1).9#
± management¶s perceptions. +&+')1)&%

:-);%+%$"&
).;)-%$"&
"2

"2
#).4$;)
):-);%)3
#).4$;)#

Gap two: Management¶s

Gap five: Perceived service gap. perceptions ± SQ specifications.

!

#-);$2$;+%$"&

).;)$4)3

#).4$;)
Gap three: SQ specifications ±
service delivery.

"110&$;+%$"&
+-
2"0.(
).4$;)
3)*$4).<
>
).4$;)

%"
;0#%"1).
):%).&+*
;"110&$;+%$"&#
3)*$4).<

$'0.)(
+.+#0.+1+&=
+&3
)%
+*=
+-
"3)*

The Gap model is helpful to the management of businesses in its ability to resolve the issue
of service quality by creating an understanding of the expectations of customer and then also

c 27
c c c Discussion

helping in the design and operation of the services to meet customer¶s expectation and
quality standards. Babakus and Boller (1992) have found that the ³leading contributor to the
gap model score is the µperceptions¶ score´ in the instrument because of a widespread
response tendency of people to rate there expectations relatively high. Churchill and
Surprenant (1982), in their work on Customer satisfaction, have studied whether the
outcome of Gap model measurements or interpretations is of value or new keeping in mind
that gap model provide a direct measure of customer¶s expectation and their perception.
Kahneman and Miller (1986) have argued that consumers of the product and services have
the tendency to assume and get fixated to ³experience-based norms´ after experiencing the
product or the service itself, instead of having any expectations prior to the delivery of
service. Babakus and ~nhofe (1991) have pointed out that it is equally possible for
consumers to feel encouraged and normally have the attitude that ³~-have-high-
expectations´. And indeed, Parasuraman et al., 1991b have confirmed with their finding that
the ³majority have recorded high expectations by scoring above six on the seven-point scale
with the overall mean expectation to be 6.22 (Parasuraman et al., 1991b).

 
!




The most popular assessments tool for Service Quality (SQ) is SERVQUAL, it is an
instrument designed by the marketing research team of Parasuraman, Berry and Zeithaml.
(1985, 1986, 1988, 1990, 1991a, 1991b, 1993, 1994) This instrument originally consisted of
10 dimensions of SQ (reliability; responsiveness; competence; access; courtesy;
communication; credibility; security; understanding/knowing the customer and finally
tangibles) but since its inception till now has evolved into a set of five dimensions
(Tangibles, Reliability, Responsiveness, Assurance and Empathy). Within the 5 dimensions
SERVQUAL consists of 22-items instrument which helps in to measuring the expectation
and perceptions of the customers based on their experience. The premise about SERVQUAL
scale is that if expectations are higher than the performance that will produce a negative
score and will result in a low or bad perception Service quality, on the other hand if
expectations are lower than the performance of the service or product, it produces a positive

c 28
c c c Discussion

score that results in a perception of good Service quality. Perception is made when the
customers compare their expectation of service with performance of the service.

Blanchard & Galloway, (1994), have confirmed based on their work on TSB Bank plc, that
the GAP model developed by Parasuraman et al. as the most suitable modeling method for
their data, however they have reported the instrument of GAP model the SERVQUAL to be
of limited use. Madhukar, et. al. (1999) have done a comparison of SERVQUAL scale
against SERVPERF scale, their assessment is about the developing economy of ~ndia, their
results confirm a ³multidimensional construct of service quality´ and their studies confirms
the superiority of SERVQUAL scale compared to SERVPERF scale. Barbara R. Lewis
1993, reports successful implementation of the gap model, which she implemented on
various businesses, she has collected ³opinions of managers, employees and external
customers´, and successfully finds proof of different gaps in the service, her work also
confirms the practicality of SERVQUAL instrument. Also the work carried out by Al-
Tamimi & Al-Amiri (2003), confirms applicability of SERVQUAL ~nstrument.


~n recent years a modified version of SERVQUAL instrument, named CARTER instrument,
as reported by (Abdul-Qawi Othman & Lynn Owen, (2001), have been successfully used for
the evaluation and improvement of service quality of ~slamic Banks. This new approach
comes with a slight modification by the addition of a new dimension to comply with the
Sharia¶h (~slamic Law). This Dimension is identified as µcompliance¶ and is an integral part
of any instrument dealing in ~slamic services.

 
!

 

  Ý
.";)##
".$)&%+%$"&(
Parasuraman et al. (1988) claimed that SERVQUAL delivers a
necessary framework using the format of expectations and perceptions, surrounding items in
the five dimensions. They also suggested that the framework is flexible and can be modified
and changed pertaining to the requirements of the situation. Parasuraman et al (1988), also
claimed the appropriate and firm ³psychometric properties´ and structure of SERVQUAL
with its 22 items based on 5 dimension sound and stable´. Parasuraman et al (1991), claimed

c 29
c c c Discussion

that ³SERVQUAL¶s dimensions and items represent core evaluation criteria that transcend
specific companies and industries´, and ³~n other words, the five dimensions are generic
across service contexts´.

  
$1)&#$"&#(
SERVQUAL instrument reveals nine separate dimensions of Service

Quality, upon modification as suggested by Francis Buttle (1996). He further argues that the
number of dimensions can be varied according to the service sector being examined. ~nfact
some authors have suggested ³a single-factor solution´, as Babakus et al.¶s (1993b) have
identified, in their investigation of 635 utility company customers, only one factor solution.
According to them the examination of this case produced a ³single-factor model´ of Service
Quality where 66.3 per cent variance was reported. Babakus et al (1993b) have suggested
many explanations for this behaviour of the SQ instrument, like ³nature of the service, non-
response bias and the use of a single scale to determine the gap between expectations and
perceptions´. Babakus and Boller (1992) in explaining the use of dimensions have suggested
that ³service quality may be factorially complex in some industries and may be simple and
even unidimensional in some others´. They further suggest that the number of Service
Quality dimensions may invariably depend on the individual quality of service. Parasuraman
et al. (1991b) have given two reasons to answer for these abnormalities. The first reason they
suggest is the combined effect of the different ways in which data is collected and is
analyzed. As Francis Buttle (1996) points out that more reasonable explanation provided by
Parasuraman et al (1991b) is that, ³differences among empirically derived factors across
replications may be primarily due to across-dimension similarities and/or within dimension
differences in customers¶ evaluations of a specific company involved in each setting´.
Spreng and Singh (1993) have reported that there exists a very minuscule difference between
some of the dimensions of the instruments. ~nfact they have found correlation co-efficient of
0.97 between Assurance and Responsiveness dimensions, which in other word mean that
they are not separate dimensions. Parasuraman et al., (1991b), have found that four items in
the dimension of Tangibles can itself be ³broken down into two separate dimensions´, where
one can be related to ³equipment and physical facilities´, and other to ³employees and
communication materials´. They have also accepted the arguments of Spreng and Singh
(1993), about the inseparability of Assurance and Responsiveness dimensions.

c 30
c c c Discussion

  
"&%):%0+*
#%+?$*$%<( Carman (1990) has examined the SERVQUAL instrument and

its generic qualities, in three different service situations. He has identified five to seven
essential dimensions, using factor analysis, suggesting that some dimensions are imperative
in given circumstances or for a particular situation, for example Responsiveness, a key
constituent in the instrument, has been found to be weak in the framework of dental clinics.
Carman (1990) suggests that an important dimension may be divided into a number of ³sub-
dimensions´, according to the requirement or the need. He also suggests that all the original
ten dimensions of the SERVQUAL instruments should be used and then working their way
downward an appropriate number of dimensions may be found. At the same time Ford et al.
(1993) have argued the use of same scale of dimensions is highly unlikely in different
cultures.

  
"1-"#$%$"&
"2
%)1#( The Parasuraman et al SERVQUAL is composed of four or

five items for each dimension. However research has shown that it may vary from one
business to other. For example in Carman¶s (1990) have used 40 items in their research of
hospital services, Babakus and Mangold (1992) have identified a 15 items instrument in their
study on hospitals instead, Saleh and Ryan (1992) employed an instrument composed of 33
items for their research on hospitality business, Bouman and van der Wiele (1992) in their
study of automobile service employed 48 items, Fort (1993) to conduct research on a
software concern employed 31 items instrument, and Abdul-Qawi Othman & Lynn Owen
(2001) in there study of ~slamic banks have used 34 items. So SERVQUAL instrument can
be used according to the suitability of the business or sector etc, however the form of the
additional, new or modified items cannot be dissimilar compared to the other items.

  
"*+.$%<( 13 statement pairs out of the 22 items in the original SERVQUAL scale
were worded positively, and the rest were worded negatively as is pointed out by Francis
Buttle (1996). He further argues that the negatively worded statements are associated with
all the statements of Responsiveness and Empathy. Francis Buttle (1996) suggest that this
methodology was originally adopted by Parasuraman et al.¶s to reduce the ³systematic
response bias´ which is caused by yea-saying and nay-saying people. This is considered a
good practice, however it can cause problems as well associated with the comprehension

c 31
c c c Discussion

errors that the respondents can make, others may take more time in reading the items as is
argued by Wason and Johnson-Laird, (1972), reported by Francis Buttle (1996).

  
;+*)
-"$&%#: The seven-point Likert scales has been the centre of much criticism,
however these criticisms are not specific to the application of SERVQUAL. Lewis (1993)
remarks about the scale are that the scale lacks word based labelling associated with points
on the scale. Lewis (1993) further suggests that to avoid extensive usage of the ³extreme
ends of the point scale´ by the respondents all the points should branded with distinctive
words. Another important issue is related to defining the midpoint of the scale. To find a
solution to this issue Babakus and Mangold (1992) have suggested and used a five-point
Likert scales.


  
+.$+&;)(
The extracted variance should be strictly employed for the validity of
construct as is argued by Fornell and Larcker (1981). Parasuraman et al. (1988) reported that
extracted variance from the factor of SERVQUAL instrument to be 56.0 % for the banks,
57.5 % for credit cards, etc. Parasuraman et al. (1991a) reported extracted variances to be
67.2 % for a telephone company, 68.3 % for an insurance company, 70.9 % for another
insurance company, 71.6 % for a bank, and 66.9 % for another bank. Francis Buttle (1996)
argues that higher levels of variance extracted are obtained when the modified scales are
used. He also suggests that the validity of the measures increases with the higher values of
extracted variance.

  
33$%$"&+*
3$1)&#$"&
"2
8 "1-*$+&;)9
$&
!

Since SERVQUAL dimensions identified by researchers studying different service

categories, such as banking, telephone services, securities brokers, and credit cards
companies. According to discussion and the critics above, new studies in Service quality
should be based on the original ten or new five dimensions, and should only be modified or
supplemented to suit particular industry by suggesting or examining new dimensions. That is
because of the existence of cultural differences between countries, regions, religions, or
ethnic groups which reinforce the importance of building additional dimensions for Service

c 32
c c c Discussion

quality in the ~slamic banking industry. Therefore, the set of quality dimensions defined are
based on factors such earlier research, ³bank¶s internal and external environment´ and
culture that guide the researcher to add a new dimension called ³Compliance with ~slamic
law´ in addition to the Parasuraman¶s et al¶s five dimensions RATER scale, as suggested by
Abdul-Qawi Othman & Lynn Owen, (2001). Hence, RATER scale is modified to include the
following dimensions ompliance, ssurance, eliability, angibles, mpathy, and
esponsiveness (CARTER) were conceptualized, (see Appendix ~~~ for items and details on
definition of each dimension).


 6
 

!


Few of the major criticisms as argued by Francis Buttle (1996) as given below

1.c SERVQUAL has been ³inappropriately based on an expectations and perception

model of disconfirmation where as it should be based on attitudinal model´ of
Service quality.
2.c ³Economically, statistically and psychologically´ SERVQUAL does not achieve a
theoretical confirmation as argued by Francis Buttle (1996).
3.c Francis Buttle (1996) argues that ³four or five items are not sufficient to can not

obtain the variability required for the appropriate validity´ in all the service quality
dimensions.

Cronin and Taylor (1992, 1994) argue about conceptual failure of the SERVQUAL
instrument they criticize its acceptance of the disconfirmation model. They further argue that
³Perceived quality can be best conceptualized as an attitude´, criticizing Parasuraman et al.
for not being able to perceive the attitudinal definition of Service Quality. Parasuraman et al.
(1988) in their original work have already suggested the similarities between Service Quality
and attitude, as reported by Francis Buttle (1996). Francis Buttle (1996) argue that Cronin
and Taylor¶s criticism of the Parasuraman et al disconfirmation model is based on the
suggestions of Oliver (1980), which argue about the distinctive character of ³Service Quality
and Customer satisfaction´, but Service Quality and Customer satisfaction are only

c 33
c c c Discussion

associative with the factor of satisfaction reconciling ³the effect of prior-period perceptions
of Service Quality´. Oliver, (1993) also suggest that the ³Service Quality and Customer
satisfaction´ can also show distinguished character in terms of their contents.

Aubrey and Zimbler (1983), Crosby (1979), Juran (1951) and Masser (1957) all have been
theorizing ³costs/benefits of quality improvement in service settings´ as reported by Francis
Buttle (1996). Francis Buttle (1996) also argue that the contradiction also arises from
SERVQUAL with the use of ordinal scale such as Likert scale in obtaining the data, and
performing analyses such as factor analysis with methods only suitable for ³interval-level
data´.

c 34
c c c Discussion


 



 Ý


 

~n the design phase of the research, a plan was drawn to ensure the accuracy and
effectiveness of the research topic. Contrary to the original plan, there were the limitations of
obtaining data and pertinent response from the Banks, and the customers alike so the final
plan of the research had to be modified many times. The time constraint has posed further
complexities in collecting the required information, from customers of banks.

The research has concentrated on a limited outset of possibilities, for collecting data from
religious congregations, mainly from Mosques, it has limited the effort to obtain data from
females, and so most responses were obtained from male customers.

For current status of ~slamic financial services in the confines of the UK, it is evident, in the
literature, that banks must ³increase their responsiveness to market considerations in terms
of their positions, management and marketing strategies´, as pointed out by Mosad Zineldin,
(1996). Also as Naser & Moutinho (1997) have identified a shift of ~slamic financial services
from ³purely ~slamic banks towards western conventional banks´, so there is a major
element of increased competition among banks. Naser & Moutinho (1997) recommend the
importance of an ³effective Marketing Strategy, as a major tool in gaining competitive
advantage´ over the others. This strategy comes as a tool because of the psychological image
of ~slamic finances on the ~slamic community
A question that we have tried to elucidate is
whether the µLack of proper promotion and marketing strategy of these new services, has
lead to a weakening of the trust of people in these services and consequently resulted in the
expansion of this business to masses therein.

A change in marketing strategy can lead to a significant change in the bottom line results, as
is evident from the cases of popularity of these financial services in Singapore and US (Kass,
(1992), ~
, (1995a), Ramin & Kwon, (2000), Tarek S. Zaher and M. Kabir Hassan,
(2001)). At the same time as is pointed out in the literature that use of proper resources, that

c 35
c c c Discussion

the big banks have, in training staff on grounds of the basic principles of ~slamic law, and
available modes of finances can help the banks in gaining a strategic advantage over others.
³Central to the delivery of any service product is the service encounter between the provider
and the customer. This is also known as interactive marketing. This aspect of services is an
important determinant of quality because it brings together all the elements of the services
marketing mix and is the point at which the product itself is created and delivered´ as
pointed out by Kotler, P. (1994). A ³satisfied consumer will repeat the purchase of the
product and convey positive messages about it to others´ recognized by Anderson and Mitall
(2000), Dispensa, 1997). This argument leads to the conclusion that there exists a lack of
proper service delivery to customers, particularly when customers or potential customers ask
for details of these services then generally speaking the staff doesn¶t have the information.
Therefore a µLack of proper training of the staff will lead to poor customer service rank in
the eyes of the customer and consequently will lower the position and image of the bank¶.

~n the bank selection criteria, ³convenient location of the bank¶s´ branch is a major
contributor. But at the same time it helps in providing good service quality and gaining
customer satisfaction. The importance of the issue of convenient location have been
recognized in the literature by Hegazy (1995), Metawa and Almossawi (1998)=
Haron etc.,
1994; Kaynak and Yavas, 1985; Javalgi etc., 1989;Khazeh and Decker, 1992; Laroche etc
., 1986; Ross, 1989). However, there is a general view here, that these services are not
easily available or are not conveniently close, if at all such services are available, this can be
attributed to a general reluctance on the part of banks to open and start offering these
services, even in highly Muslim populous areas, like in London. Further elucidation of this
issue has been prompted at here that µAvailability of these services is located at remote
confines, away from general approachability of the masses, causing a general lack of
awareness in public, that these services exist.

 


 

Methodology was to obtain empirical data, by Systematic Random Sampling, based on the
modified ~nstruments Given below (Appendix ~); the reliability of the data will be checked

c 36
c c c Discussion

using the statistical analysis domain sampling model, employing variance tests and using
Factor Analysis¶ to analyze interrelationships among the large number of variables and to
explain these variables in terms of their common underlying dimensions. Finally applying
the µParasuraman Gap model¶ for determining the Gaps in the services being provided and
also to identify the flaw as evidence in evaluating the shortcomings and problems related to
~slamic Banking.


 
!




The instrument (Questionnaire shown in Appendix ~) was developed keeping in mind the
arguments, and using the CARTER model (Abdul-Qawi & Owen, 2001). The questionnaire
had three main sections, Section 1 (Question 1 to Question7) was related to the demography,
section 2 (Question 8 to Question 15) was related to the profile of the customer, related to
the banking of the individual, as dichotomous questions for gathering customer banking
behavior, and finally section 3 (Question C1 to R1) was related to the SERVQUAL
instrument itself, with the use of 5 point likert scale, as mentioned above in the literature
survey. The ~nstrument included an additional dimension of µCompliance¶, as mentoned
above. Modifications were mad to it with reduction in the number of items, strictly to focus
on the research topic, these reductions in the number of items were made to avoid the
unusual bias of the statistical analyses on qualitative data, also literature recommends it, as
mentioned above, (Babakus and Mangold (1992), Bouman and van der Wiele (1992),
Carman¶s (1990), Fort (1993), Abdul-Qawi Othman & Lynn Owen (2001), Necmi Kemal
Avkiran, (1994 )). The original CARTER model consists of 34 item but here the,
SERVQUAL consisted of 11 items. Another important element of the questionnaire was the
where respondents were requested to provide any comments that they may have regarding
~slamic financial services. ~n our discussion below SERVQUAL will represent the modified
version of the SERVQUAL and CARTER MODEL, used in the current study.

c 37
c c c Discussion

 
 

(

For the sample size a subjective approach found in the literature, by Luck D. and Rubin R.
(1987), & Clare Morris, (2000), was adopted. Since there are no adequately accurate
scientific formulas to find a size of the sample required, there is a method with an
assumption that the sample will be obtained randomly from the whole population, as a
representation of the population. Thus by applying the formula, based on the assumption, if
we accept a 95% level of confidence in representing the population, then the confidence
coefficient is Z=1.96. Now supposing that the tolerable error to be 10% we can calculate the
size of the sample to be approximately 100. This figure is not a true representation of the
actual number of samples required, but based on the assumption it is workable.

Data was collected with the help of the ~nstrument developed, from the Muslims, in
Southampton and London, at community centers and at Mosques normally after the
congregation time, which helped in gathering a good number of responses. The responses to
the questionnaires were self administered and individually collected to justify that all of the
respondents were Muslims and none of the responses were filled by non-concerned. ~t also
helped in removing the element of doubt about the in-comprehensibility of the questionnaire.
~ndeed with the test runs and in the beginning, there was complain about the
incomprehensibility, related to the complexity of section three containing the SERVQUAL
instrument itself. This problem was removed by providing a simple instruction leaf, giving
information on how to fill the questionnaire, and since all of the responses were self
administered thus it further removed any element of false filling of the response.

A total of 163 responses from banks customers were collected, a similar study of this nature
have been carried out with 154 responses by Kayis B., et al (2003). The responses were
divided among customer who are aware of these services being offered or who are not aware
of these services being offered. So the SERVQUAL based study is subjected to only those
responses which have replied µyes¶ to question number 8, or 10, or 11, and have participated
in evaluating the service quality of the ~slamic banking. As a result 112 questionnaires were
used subjected to the major study element. The respondent replied to all of the sections

c 38
c c c Discussion

concerned. There is a high degree of variance associated with the responses on of the all
dimensions of the SERVQUAL, except the compliance, because as it is found in the
literature that the items mentioned in this dimension had negligible variation in the
difference of opinion of the respondents, in evaluating the quality of the services. This is
because that it encompasses the core issue of ~slamicity of financial services, and which is
identified with both the functional and psychological risk of the individual.

 



For the purpose of data analysis, special statistical software tool SPSS 12.0 version for
windows was used. For the procedure of data analysis, two types of analysis were conducted
in this study, profile analysis and statistical analysis. Profile analysis was achieved as a
means of classifying a particular set of subjects according to a particular number of relevant
attributes. This method is widely used in social science research especially those studies that
involve the investigation of behavioral issues. This method of analysis has been used in
many studies as a first step before conducting any statistical analysis. To check the validity
of the survey and data obtained some more statistical tools have been used.

c 39
c c c Discussion







 Ý




Of the total number of 163 responses, only 112 responses were selected from all of the
responses for major statistical analysis because these responses represented the customers of
banks, who are aware of ~slamic banking in some respect to evaluate it or who have
currently or previously experienced ~slamic banking. Summary of the some of the key
characteristics of the research is as under:

Out of 112 only 38 responses came from people who actually hold an ~slamic account in a
local bank here in UK, the rest of the 74 responses came from people who either have had an
~slamic account or have used any of the ~slamic financial services n any form, or those who
know about these services but due to fact that they are not satisfied with any of the ~ssues
related to ~slamic financial services being offered, these can be the issues like ~slamicity of
~slamic Financial services, location of such services offering branches etc. Only 9.8% of the
responses were obtained from Females, and the rest of the samples were obtained from Male
participants in the survey. 73 % of the ~slamic bank¶s customers were found to be, between
the age of 30 to 49 years. 61% of the customers of ~slamic financial service were found to be
British national. But on the 112 responses 43.8 % were British national, 27.7% were from
~ndian subcontinental and the Far East region, 26.8% were of Middle Eastern or African
origin, and only 1.8 % of the responses were obtained from nationals of other origin. ~t
helped enormously to obtain data related to the satisfaction level of customers of banks, who
have come from countries where the dominant banking system is ~slamic in nature. Although
according to literature survey monthly income should not be related to holding an ~slamic
financial service, but from the responses obtained, 46% of the customers of ~slamic banks
fall in the income range of £ 2000-3000 per month, and 29 percent fall in the range of £
1000-2000. 95.5% of the respondents do banking with Barclays, HSBC, ~slamic Bank of
Britain, Lloyds TSB, and Natwest and literature review tells us that all of these banks have
atleast some kind of ~slamic financial services, with them. Of the 112 respondents 74.1%
know that there bank is offering ~slamic financial services and 25.9 % don¶t know if there

c 40
c c c Discussion

banks is offering any ~slamic financial services. At the same time 59.8 % of the banks
customers have replied that they have an ~slamic account with any of these banks or they
have obtained ~slamic financial services but 40.2 % banks customers have not. As far as the
awareness of ~slamic financial services is concerned only 4.5 % have replied that they
received information from either the Bank itself, or the banks staff has provided the
information. 26.8 % came to be aware of these services through the word of mouth, i.e. from
friends, 22.3 % obtained the information from the media, but most of the respondents
(41.1%) came to be aware of these services from Community gatherings and meetings. Also
84% of the banks customers have said that the Banks offering ~slamic financial services are
not conveniently close to there house or their workplace.

 
 


The statistical tests that are performed pose some limitations, due to the spread of the
sample, gauged against the normal distribution of the population sample. Most of the
distributions are not true representations of a normal distribution but in almost all of the
cases the variability of the spread is not too significant to eliminate the tests all together.


$c +*$3$%<
"2
%,)
%)#%( The reliability and validity measure of data to be consistent was
obtained by employing reliability test on SPSS 12, and obtaining the Cronbach¶s
alpha coefficients, for all the elements of SERVQUAL, a tabulated summary of the
analysis is given in Table-2 and Table-3 below, for the items of dimension of
µCompliance¶ and the rest of the items respectively. The overall alpha coefficient
obtained for the Compliance is 0.732, and for the rest of the items is 0.742. Since a
measure to be consistent enough to give similar results of opinion in the population
in case of the retests, the coefficient alpha should be 0.7 or more (Kayis B., Kim H.,
& Shin T. H., (2003)). So the coefficient alphas obtained with current studies are
enough to confirm the reliability of the data.
c
c
c
c
c 41
c c c Discussion

©
c c
c

 
Ô  c    



 cc
’
 
c
c
c
©
c
c
c

 
Ô  c    



 cc
’  
c
c
$$ c %+&3+.3
%)#%: ~ndividual frequency tables are tabulated in Appendix ~V, tables
provides the descriptive statistical figure such as mean, median, standard Deviations,
Variances, and the skewness of all the 11 individual items of the SERVQUAL. A
statistics obtained on the means and medians of all the 11 items give the following
measure given in Table 4. The skewness of the mean is elaborated in the Figure 3
below. ~t clearly shows that the data is positively skewed, meaning that customers of
the ~slamic financial services are generally not too satisfied with the kind of services
they are being provided. But still this skewness is not very prominent. The lowest
satisfaction is associated with the first item of the compliance, C1, which whether the
customers are satisfied with the promise of bank to run its functions on ~slamic law
and principle. Customers gave the highest point of satisfaction to ~tem µT2¶, the
familiarity reputation and image of there bank. Table 4 also gives the kurtosis
behaviour of the distribution, except the elements of C1 and T2 which are
comparatively flatter distributions; all of the rest of the distributions are quiet steep.
A major element of the table 4, is variance, giving the variability of the score around
the mean of individual items is not too significant with respect to the standard
deviation of the same item, thus meaning that quality survey represents the actual
satisfaction level of the population.
c

c 42
c c c Discussion

+?*)
(
$4$&'
#%+%$#%$;#
"&
ÝÝ
!
$%)1#

(C1, C2, «, R1, represents SERVQUAL items, as mentioned in Appendix ~)

c
c
+?*)
(
%+%$#%$;#
"2
%,)
)+&#
+&3
)3$+&
"2
ÝÝ
%)1#

c
c
$'0.)
(
.)@0)&;<
"2
%,)
)+&#
"2
%,)
ÝÝ
%)1#

c

c 43
c c c Discussion

$$$ c ."##
%+?0*+%$"&

,$
#@0+.)
%)#%( To find out that whether there exist any
relationship between the items of the SERVQUAL and the Demographic element of
the section Two of the questionnaire, Chi square test has been carried out in
conjunction with the Contingency table or crosstabs. The crosstabs with chi square
values having significance levels of more than 0.05 have been neglected and only the
relationships near (p=<0.05) have been subjected for further evaluations. For this
purpose contingency tables and Pearson chi square values for relationship of data
representing questionnaire elements of µOffer¶, µHold Account¶, µLocation¶ and µStaff
Awareness¶ with the 11 items of SERVQUAL have been obtained (see Appendix V).
The table in Appendix-V reveals that there exist a good relationship between
µHolding an account¶ with a Bank offering ~slamic financial services and its
compliance with the ~slamic banking system. The Chi square value is (^=10.959)
with a significance level of (p=0.04), given in Table 6 below. For the rest of the
items the relationship produces a less likely probability of a customer holding an
account with an ~slamic bank and doubting the ~slamicity of these services being
offered by the bank. ~n other words the customers of ~slamic accounts or services are
more concerned with the compliance issue than any other services being offered.
Other dimensions of the SERVQUAL don¶t have a strong relationship for the
customers of these services to have an account with these banks. No significant
relation can be deduced from the Chi square test for the element of, whether the
customers who are aware of these, services being offered by there own bank or not.
However there exists a relationship of significance, with the banks customers who
know that there bank offers ~slamic financial service, to the µResponsiveness¶ item of
the SERVQUAL, for which the Chi square (^=10.03) and the respective
significance level of (p=0.04) given in Table 7 below. This is true in the sense that,
of the 83% of customer who know that there bank offers ~slamic financial services
more than 54% of these are not satisfied with the banks ability to provide services
according to the needs of their customers. A Chi square test about how did the
customers got the information about these services when related to the Assurance
dimension, gives a very little relationship, with an average of chi square value of
(^=33.62) for both the Assurance items, with a significance of (p=0.06) although

c 44
c c c Discussion

slightly above the threshold of p=0.05, but with a large ^=33.62, value it is
somewhat significant. Apart from these no other significant relationship between the
elements of sections two of the questionnaire was observed. The relationships among
the SERVQUAL items were also studied to find any underlying possibilities. Thus
chi square values were compared in conjunction with the crosstabs, for Compliance
~tems with the rest of the SERVQUAL items.



+?*)




Customer who have used or use
~slamic financial services
Yes (%) No (%)
Compliance Very Dissatisfied 7.5 6.7
Somewhat Dissatisfied 38.6 68.9
Neutral 43.3 17.8
Somewhat Satisfied 9.0 6.7
Very Satisfied 1.5 0.0
Total N=67 N=45
^=11, p<0.05


+?*)


Customer who know that there bank

offers ~slamic financial services
Yes (%) No (%)
Responsiveness Very Dissatisfied 21.7 3.4
Somewhat Dissatisfied 32.5 24.1
Neutral 22.9 34.5
Somewhat Satisfied 15.7 34.5
Very Satisfied 7.2 3.4
Total N=74.1 N=25.9
^=10.03, p<0.05

$4 c .0#/+* +**$#
)#%(
Using the Krusal-Wallis H test for all the sample items in the
SERVQUAL, it makes it easier to compare the score of all groups, and the ratings
there in. The output from this procedure gives the mean rank for all grouped items,
also except the µSignificance level¶ (as in Table 8) for the items µRun on ~slamic law
and Principle¶, µPays or takes no interest¶, µLocation of the bank¶, and to some extent

c 45
c c c Discussion

µBanks familiarity and popularity¶, the significance level of the rest is more than 0.05
(approx.) indicating that there exist similarities in the ranking of all the respondents
in rating the quality of service.
+?*)


 

©c 

,& "$ 
' *"  *  c  c*"  c- /( / (  , & "$
%&c " ' # c c ( )  +  '*" c'%   .   " %c #c" $   c! 
'   c   "! !  *   "* $    c( !#  *  ! 

 ! ’  ’ ’  ’ ’ ’  ’
’

 ’  ’ ’

"#’c$’           
’ ’ ’
 ’ 
 ’ ’  ’ ’ ’ ’
 ’

’c,!(c0c1 
’c2!$c3 4c+5%6c

571
c
4 c 
)#%(
This test is performed to determine, if the means of two unrelated samples
differ, by comparing the difference between the two means with the standard error of
the difference in the means of different samples.

T = Sample one mean ± Sample two Mean

Standard error of the difference in means

The output of this procedure reveals the data given in Table 9 Below, however since
we don¶t know the standard error of the difference in means of the whole population
in question, we have to do approximation by estimating it. ~t depends on whether the
difference in the variance of the two samples is statistically significant. ~f the
Levene¶s Test is significant meaning, its probability is 0.05 or less, then the variances
are unequal and so separate estimates of variances is used to calculate the t-Value. ~f
the variances are equal then the pooled variance estimate is employed to calculate the
t-value. ~n the Table 9, below the variances are not statistically different, except for
items of the SERVQUAL, µC3¶, µT2¶ and µR1¶, since the Probability (p) value of the
Levene¶s test is more than or significantly more than 0.05, thus for all but C3, T2,
and R1, t values are based on equal variances. Also looking at the significance (2-
tailed) values in the Table 9, implies that there is a significant difference of opinion
in the group of people who know that there banks offers ~slamic financial services to
the people who donot know that. Particularly significance (2-tailed) value of a few
~tems, in the table is significantly more than 0.05 to imply this.

c 46
c c c Discussion

©
c
~

 cc
+'$'%' ( '(c*
8
9##%&'(
!"#/c* cc1 '(c*c8!"#/c*c<'#%(

=c<*%)'%&'
% ' $# * 7'
'#% 2)’c8* : ' '%&'
   c c
24 ) 2 4  # ') : <' '%&' : ' '%&' +*,'  ;..'
+#,c#%)c-%&.' !"#c$##%&' 9  ’

   ’c:   ;      
8
#((" 
') ’  ’  ’
  ’
 
’  ’ 
 
’  ’

!"# $# #%&'      
8
%* c
c 
#((" 
') ’ ’ ’  ’ ’   ’  
’
-#/(c*c#('()c%*c%'8!"# $# #%&' 
#(("c ') ’  ’
 ’  
’ 

’ 

’ 

’   ’

!"#c$##%&'
8
%* c
#(("') ’  ’
 ’ 
 ’
   
’

’   ’

- *$ )'( * ' . *)"& !"# $# #%&'  
  c  c 
#(("c ')
8
’  ’  ’  
’ ’
 ’ 
 
’   ’

!"# $# #%&'
8
%* c
c  )
#((" 
' ’  
 ’   ’
 ’
 ’
 
’ ’

0 1
%$'((c%c ##c "(%'8!"#c$##%&'   

#(("') ’  ’
 ’  
’

’ 

’ ’  ’


!"#c$##%&'         
%*c#(("')
8
’ ’ ’ ’  ’ ’ ’ 
-*$)'(c-+2c%$'( 8!"# $# #%&'   
#(("c ') ’  ’ ’   ’

’
 ’

’

’

!"#c$##%&'        
8
%* c
#(("') ’   ’ ’ ’ ’ ’  ’
2#c.*$)'(c%#%&#8!"#c$##%&'    
#)$&' #(("') ’ ’ ’   
’ ’
 
’  ’
 ’

!"#c$##%&'        
%*c#(("')
8
’   ’ ’  ’ ’  ’ ’ 
3%*,')4'#1'c5 !"#c$##%&'   
'6.''%&') 8
#((" 
') ’ ’ ’  ’
 ’
 
’

’

’ 
#%#4' '% !"# $# #%&'  ’      
   8 c  )
%* c
#((" 
' ’  ’ ’ ’ ’ ’ 
+*&# *% * 7' 1#% !"# $# #%&' ’ 
 c c c ( 8
#(("c ') ’  ’
  ’ 
 ’
 
’ 

’ ’

!"#c$##%&'   ’      
8
%* c
#(("') ’  ’ ’ ’  ’  ’
8#% ( # # / #%) !"# $# #%&'   
.*."(#c/  c 8
#((" c )

' ’ ’ ’  ’

’
  
’

’   ’

!"#c$##%&'        
8
%* c
#(("') ’ ’ ’ ’ ’  ’  ’
8#%((c#%#4''% 8!"# $# #%&' 
('$&'( #(("c ') ’  ’  ’ 
  ’
 ’ 
 
’  ’ ’

!"#c$##%&'  ’     
8
%* c
#(("') ’ ’ ’  ’ ’ ’
3%*,')4'c*%c&"(* 8!"# $# #%&'    
1"( %'(

#((" c )

' ’  ’  ’  
’

’  

’   ’ 
 ’

!"#c$##%&'          
8
%*
c
#((" ')

 ’   ’  ’ ’   ’ ’ ’  
c
c
4$ c "..)*+%$"&( Because score of the data is markedly asymmetrical (skewed) on the
variables, thus instead of the Pearson correlation, Spearman rho correlation technique
have been used to measure the strength of the relation between all of the items of the
SERVQUAL, i.e. µCompliance¶, µAssurance¶, µTangibles¶, µEmpathy¶, and

c 47
c c c Discussion

µResponsiveness¶. The Appendix V~ gives both Spearman Rho and Kendall¶s Tau_b
correlations, there has not been a significant difference between the correlations
obtained with these two methods, but since spearman is widely used there fore its
correlations are used here. Compliance is negatively correlated with almost all of the
SERVQUAL items, but with the significance level of more than p=0.001, therefore it
can be concluded that there exists no firm correlation in between the compliance
items and the rest of the dimensions of the SERVQUAL. However the dimensions
except the Compliance are all positively correlated (with their correlation
coefficient), with each other with Degree of freedom c =100, and Probability
significance of (p<0.01).

4$$ c +;%".
&+*<#$#( ~n order to reduce the size of the items by finding the matching
item and thus the interrelationship between the items, Factor analysis of the
SERVQUAL items have been carried out, the results are shown in the Appendix V~~.
From the first table we find there is a limited correlation among the constituent items.
The third table in Appendix V~~, shows that first four principle components have
been extracted and as the rest of the components have been ignored having less than
1.00 Eigen value. This is represented in the µscree plot¶ of these component numbers
against their respective Eigen values. To remove this inaccessibility to other
components, the component analysis was recomputed. This time number of factor
was fixed by giving the value in the SPSS programme. The principle component
factor analysis was conducted thereafter with 11 number of factors. Orthogonal
(Varimax with Kaiser Normalization rotational method) rotations of the factors
structure are given in the table in Appendix V~~. Only the first four factor loadings
resulted in a variance of over 10 %, when rounded. This first factor loading resulted
in a 27% and the second factor loading resulted in 21% variance. The components of
the compliance do not load highly on the first factor loading. A detailed orthogonally
rotated table of factor analysis is given in Appendix V~~~.

c 48
c c c Discussion

 





Based on the customers expectations and managements perception of the service quality a
few gaps can be identified in the service quality of the banks offering ~slamic financial
services. The average mean of the mean is 3.03 which according to the likert scale is neutral,
but the mean of the medians of all the SERVQUAL items is 2.90 which comes between
µsomewhat dissatisfied¶, and µneutral¶. But the average mean of the means, with standard
deviation of 0.405 and a skewness of 0.485 (which is positively skewed) there is good
chance that most of the respondents or customers of the ~slamic financial services are not
satisfied with the services being provided.

Average E - P (Expectation minus perception) from the likert scale for the Compliance items
reveal that the mean is 2.98, with a standard deviation of 0.35 and is negatively skewed with
-0.667. This means that satisfaction is on the border line and customers are not significantly
overestimating or underestimating the services. How ever on individual items level the again
the main cause of concern is the first item C1, which what all of the customers have doubts
about. On the related µAssurance¶ dimension, individually the customer satisfaction is on the
negative side for the P ± E, for ~tem A1, which means either that customers expectations are
high or the managerial perceptions are low, in either case the there is a gap here is providing
for customer satisfaction. But since the customers have had experience of conventional
banking as well, and ~slamic Banking being new to them, either of the practicalities is
possible or both. The other two items that have a low score are T1, which is related to the
Location of these banks with respect to the approachability of the customers, and R1, which
is related to the responsiveness of the banks management system with respect to the
customer¶s needs or demands. T1 scoring low on expectations is acceptable, due to the fact
that ~slamic banking is still at a very early age of growing. But the low score on R1, is rather
more stringent, because as is explained by many in their comments that customers are not
getting what they expect from the banks i.e. as some of the respondents commented ³~ am
getting interest being paid to my account, when ~ have already asked the bank to stop paying
me the interest.´

c 49
c c c Discussion

The statistical analysis of the percentage of customer to who the banks have themselves
approached are very few, only 4.5 % of the sample population have given the credit to the
bank for providing them or sending them information regarding ~slamic Financial service.
62.5% of respondent have said that when asked staff doesn¶t know about the financial
services, and 25% of respondents said they have never asked the staff or have never made
any query. Only 12.5 % claimed that the when they asked about these services with the bank
staff they got some information. Of the 74% that say that they are ware of these services
being offered 59 % do not hold an account. These shortcomings on the bank¶s part can be
related to the marketing of these services to individual, which in tern can be associated to the
lack of proper communication channel for services to reach to the maximum. ~t is clear that
the majority is aware of these services being offered, but the questions in there minds are
who, where and how, i.e. who is offering these services, where are such services available,
and how can ~ get the most out of these services. From the SERVQUAL it is evaluated that a
large majority is not satisfied with the Compliance ~ssue, or in another sense Compliance is a
main issue and all of the other aspects of service come later for customers of these services.
For those who are aware of these services and who know or don¶t know that whether their
bank is offering ~slamic financial services have all expressed concern and dissatisfaction on
the islamicity of these services.

These are issues related to proper publicity and promotion of these services to the niche
market of ~slamic Financial services. Thus on the grounds of the Gap model the identified
gap is the gap number 4 which related to the communication gap of the service delivery to
the target customers. This gap further propagate and forms another gap identified as the
perceived service gap, i.e. the service quality has not been achieved and the customer
satisfaction as a precursor to customer satisfaction the service quality needs to be improved
in the light of the communication gap.

c 50
c c c Discussion




 



 

Although within the domain of data available, interesting issues have been developed which
can help in developing strategy, particularly the marketing and promotional strategies for
~slamic financial service. But due to limitations of data collection and limited resources
available for such a research, it cannot be cross validated. An element of the other part of
story i.e. if banks representative¶s perspective were included in such a research to give a
comparison of the two then it would have given a more referencial outlook to the research.

The questionnaire developed also had some short coming, like respondents complaining
about incomprehensibility of certain aspects of the questionnaire, but this problem has also
been faced by other researcher using the SERVQUAL, and CARTER ~nstrument, as
mentioned above in the literature survey. To minimize such incomprehensibilities of the
questionnaire, they were self administered and individually carried out, plus also a handout
(given in Appendix ~) related to how to fill the questionnaire was provided. This has further
limited the number of responses that can be obtained within the given space of time. An
addition of further demographic and questions related to bank selection criterion can provide
an extra insight into the research.

Since the research touches issues of ~slamic financial service marketing and banking, and
due to the shortage of true ~slamic Bank¶s customers, the validity is limited. So the research
carried out in collaboration of any of the High Street banks offering ~slamic financial service
can fill up the voids that this research have had to accommodate. But this comes with
another limitation that this process will require extra amount of time for obtaining data based
on the questionnaire. Still self administration of such a questionnaire based research can be
found to be more effective.

c 51
c c c Discussion


 

~t is important for all banks to increase their market responsiveness, but addressing all issues
like positioning, management, and the strategies. We have found that there is a severe lack
of such responsiveness or marketing promotional attitude on the part of banks. We have
found a certain number of reasons causing these shortcomings to take place, although on a
very limited scale due to other limitations of the research. ~nspite of all the problems , banks
who are intending to compete in the niche market of ~slamic financial services will have to
come up with an offensive marketing strategy, to quickly gain market confidence by gaining
trust of the customer. This trust as discussed can be achieved by customer satisfaction and
service quality.

As identified many times the main issue of satisfaction is associated with the satisfaction of
customers of this niche market with ~slamicity of these financial services, these can be
addressed by employing scholars from within the communities, who can give lectures and
presentation to remove the surface level of knowledge of people that is keeping them away
from trusting these services. As it was also identified that a large majority of customers are
aware of these services but, have doubts in minds, plus since there knowledge is based on
word of mouth, therefore this can be used as strategic mean for promotional aspects. i.e. to
encourage local communities Mosques to get involved and disseminating this knowledge.

An interesting comment that was obtained from one of the Respondents, goes ³«as
Muslims we are all inclined to involve in business practices which doesn¶t involve Riba
(~nterest), but we don¶t know where to go and find such a service. Even our Mosque¶s
management doesn¶t give lectures on ~nterest free banking because they themselves are
involved in conventional interest bearing banking, so they don¶t feel very confident in asking
others to keep away from it.´. Thus, banks have to either reinforce or modify customer¶s
perception or image.

c 52
c c c Discussion

So the banks that will position themselves favorably within a particular marketplace, relative
to competitors, will earn high rates of return or profits irrespective of average profitability
within the market.

With some views and comments of the scholars and community members it was found that
banks, e.g. HSBC and Lloyds TSB have been trying to carry out community marketing, this
type of marketing is experimental for them as it seems. But this is the right type of marketing
approach for such services to take pace. This type of marketing can help develop a long term
trust, and can prove to be a long term strategic choice for banks.

~n the light of discussion it can also be said that to improve customer satisfaction a trust on
management and staff is necessary. As it is found and discussed above that from customer
satisfaction point of view, delivery of any service product is the service encounter between
the provider and the customer. This aspect of services is an important determinant of quality
because a satisfied customer will repeat the purchase of the product/service and will convey
positive messages about it to others. This argument leads to the conclusion that there banks
need to improve the aspects of service delivery to customers, particularly when customers or
potential customers ask for details of these service then generally speaking the staff doesn¶t
have the information. Banks need to train there staff, and provide more opportunities of the
availability of these services close to the doorstep of the customers.

Location is a big question on everybody¶s mind who wants to use these services, but banks
are trying hard to increase the number of possible outlet for customers. But seemingly it is
growing more slowly compared to the growth of the ~slamic financial service. Therefore
increasingly there is a need for the banks to realize the pace at which these services are
growing. Because on the other hand there is the possibility that potential customers might
loose interest in these services particularly because of the lack of interest from the banks side
to provide them the service they want and is being provided for at other place.

~n this research we have also found that service quality is an important issue in measuring
customer satisfaction in ~slamic banking industry. However, the CARTER ~nstrument

c 53
c c c Discussion

measuring service quality with multi-dimensional variables and expectations

conceptualization, needs clarification and qualification in terms of all factors especially,
religious and cultural factors.

c 54
c c c Discussion


 

Abdul-Qawi Othman & Lynn Owen, (2001), ³Adopting and Measuring Customer Service
Quality (Sq) ~n ~slamic Banks: A Case Study in Kuwait Finance House´ ~nternational
Journal of ~slamic Financial Services, Volume 3. Number 1, Apr-Jun 2001

Ainley, M. (1997, October). Under a veil of regulation. The Banker, 73±74.

Allred A.T.; Addams H.L. ³Service quality at banks and credit unions: what do their
customers say?´, Managing Service Quality, Volume 10, Number 1, January 2000, pp. 52-
60(9), 0?*$#,).( Emerald Group Publishing Limited

Al-Tamimi H.A.H.; Al-Amiri A., ³Analyzing service quality in the UAE ~slamic banks´,
Journal of Financial Services Marketing, December 2003, vol. 8, no. 2, pp. 119-132(14),
0?*$#,).( Henry Stewart Publications

Anderson, Claes Fornell, and Lehman D. R. (1994) ³Customer Satisfaction, Market Share,
and profitability: Findings from Sweden´ Journal of Marketing, Vol. 58, No, 3, pp. 53-66

Anderson, E.W., Fornell, C. and Lehman, D.R. (1993), ³Economic consequences of

providing quality and customer satisfaction´, Working paper, (Report 93-112), Marketing
Science ~nstitute, Cambridge, MA.

Anderson, Eugene W. and Mittal V. (2000), ³Strengthening the Satisfaction-profit-chain´

Journal of Service Research, Vol. 3, No. 2, pp. 107-120.

Anderson, W.T., Fox, E.P. and Fulcher, D.G. (1976), ³Bank selection decisions and market
segmentation´, 
cc
eti , Vol. 40, pp. 40-5.

Andersson, T.D. (1992), ³Another model of service quality: a model of causes and effects of
service quality tested on a case within the restaurant industry´, in Kunst, P. and Lemmink, J.
(Eds),  ityc emetcice
ice, van Gorcum, The Netherlands, pp. 41-58.

Aubry, C.A. and Zimbler, D.A. (1983), ³The banking industry: quality costs and
improvement´,  ityc

ess, December, pp. 16-20.

Babakus, E. and Boller, G.W. (1992), ³An empirical assessment of the SERVQUAL scale´,

cc siessc
ese
ch,cVol. 24, pp. 253-68.

Babakus, E. and ~nhofe, M. (1991), ³The role of expectations and attribute importance in the
measurement of service quality´, in Gilly, M.C. etcc(Eds), 
ceei sccthec mme
c
 ct
s¶ce
ece, American Marketing Association, Chicago, ~L, pp. 142-4.

Babakus, E. and Mangold, W.G. (1992), ³Adapting the SERVQUAL scale to hospital
services: an empirical investigation´, Hethce
icesc
ese
ch, Vol. 26 No. 2, February, pp.
767-86.

c 55
c c c Discussion

Babakus, E., Pedrick, D.L. and ~nhofe, M. (1993b), ³Empirical examination of a direct
measure of perceived service quality using SERVQUAL items´, unpublished manuscript,
Memphis State University, TN.

Barbara R. Lewis, ³Service Quality Measurement´, Marketing ~ntelligence & Planning,

Volume: 11 ~ssue: 4, Year: 1993, Publisher: MCB UP Ltd

Bartell, S. (1993), ³Building strong customer relations´, c

eti , Vol. 25 No. 6, pp.
16-19.

Bedall, D. and Power, T. (1995), ³Cultivating loyal patients´, 

ccHethc
ec

eti , Vol. 15 No. 4

Berry, L.M. (1983), ³Relationship Marketing´, in Berry, L.L., Shostack, G.L. and Upah, G.
(Eds), me
i ce
spectiescce
icesc
eti ,cAmerican Marketing Association,
Chicago, Proceedings Series, pp. 25-8.

Bird, A. (1997), Super community banking strategies: winning the ware for the customer
relationship, ~rwin professional publishing, Chicago, ~L.

Blanchard R.F.; Galloway R.L. ³Quality in Retail Banking´, ~nternational Journal of Service
~ndustry Management, Volume 5, Number 4, October 1994, pp. 5-23(19) 0?*$#,).(
Emerald Group Publishing Limited

Boulding, W., Kalra, A., Staelin, R. and Zeithaml, V.A. (1993), ³A dynamic process model
of service quality: from expectations to behavioral intentions´, 
cc
eti c

ese
ch, Vol. 30, February, pp. 7-27.

Bouman, M. and van der Wiele, T. (1992), ³Measuring service quality in the car service
industry: building and testing an instrument´, ~te
tic 
cce
icec~ st
yc
 emet,cVol. 3 No. 4, pp. 4-16.

Bowen David E. and Edward E. Lawler, (1992), ³The empowerment of service workers
what, why, how, and when´ Sloan Management Review, (spring) 35-39

Brenhardt, K.L., Donthu, N. and Kennett, P.A. (1994), hec
etishipcetweec stme
c
tiscti,cmpyeesctiscticc
itiity:cc it icysis, Department
of Marketing, Georgia State University, Atlanta, GA.

Brooks Alison 1999. ³Repo market crosses line in the sand.´ ~nternational securities lending,
London. 37-40.

Brown S. W., and Swartz T. A. (1989), ³A gap analysis of professional service quality´,
Journal of Marketing, Vol. 53, pp. 92-98

c 56
c c c Discussion

Buzzel, R.D. and Gale, B.T. (1987), hec~c

icipes:cii ct
te yctce

mce,
Free Press, New York, NY.

Carman, J.M. (1990), ³Consumer perceptions of service quality: an assessment of the

SERVQUAL dimensions´, 
cc
etii , Vol. 66 No. 1, Spring, pp. 33-5.

Chakravarty, S., Widdows, R. and Feinberg, R. (1996), ³How moments of truth define bank
customer relationships´, 
cc
etici ce
ices, Vol. 18 No. 1, pp. 29-34.

Chitwood, R. (1996), ³Selling in a non-sales environment´, c

eti , Vol. 28 No.7,
pp. 41-2.

Churchill, G.A. (1979), ³A paradigm for developing better measures of marketing

constructs´, 
cc
eti c
ese
ch, Vol. 19, February, pp. 64-73.

Churchill, G.A. and Surprenant, C. (1982), ³An investigation into the determinants of
customer satisfaction´, 
cc
eti c
ese
ch, Vol. 19, pp. 491-504.

Clare Morris, (2000), ³Quantitative Approaches in Business Studies´, Financial Times,

Prentice Hall, Fifth Edition, Pearson Education Ltd., UK

Cronin Jr, J.J. and Taylor, S.A. (1992), ³Measuring service quality: a re-examination and
extension´, 
cc
eti , Vol. 56, pp. 55-68.

Cronin, J.J. Jr and Taylor, S.A. (1994), ³SERVPERF versus SERVQUAL: reconciling
performance based and perceptions-minus expectations measurement of service quality´,

cc
eti , Vol. 58, January, pp. 125-31.

Crosby, P.B. (1979),  ityc~sc

ee, McGraw-Hill, New York, NY.

D. Bailey, ³~nside quality service´, Managing Service Quality, Volume: 1, ~ssue: 5, Year:
1991, Publisher: MCB UP Ltd

Dale, R. (1997, November). ~dentity and diversity in the global big bang. Financial
Regulation Report.

Damian Hodgson, (2002), ³Know your customer´: Marketing, governmentality and the
³new consumer´ of financial services´. Management Decision, Vol. 40, No. 4, pp. 318-328

Dispensa, G. (1997), ³Use logistic regression with customer satisfaction data´, 

eti c
ews, January 6, p. 13.

Drucker, Peter J. (1954), ³The Practice of Management´ New York: Harper and Row; As
found in[Edward C. M., James L. O., Calder B. J., and ~acobucci D. ³Customer Satisfaction
across Organisational units´ Journal of Service Research, Vol. 6, No. 3, February 2004, pp.
231-242, Sage Publication]

c 57
c c c Discussion

Du Gay, P. (1993) ³Numbers and souls: retailing and the de-differentiation of economy and
culture´ British journal of sociology, Vol. 44, No. 4, pp. 563-88

Errico, L., & Farahbaksh, M. (1998, March). ~slamic banking: issues in prudential
regulations and supervision.

Evans, R.H. (1979), ³Bank selection: it all depends on the situation´, 

ccc

ese
ch, Vol. 12, pp. 243-9

Fornell, C. (1992), ³A National Customer Satisfaction Barometer: The Swedish

Experience´, 
cc
eti , Vol. 56, January, pp. 6-21.

Fornell, C. and Larcker D.F. (1981), ³Evaluating structural equation models with
unobservable variables and measurement error´, 
cc
eti c
ese
ch, Vol. 18,
February, pp. 39-50.

Fornell, C. and Wernerfelt, B. (1987), ³Defensive Marketing Strategy by Customer

Complaint Management: A Theoretical Analysis´, 
cc
eti c
ese
ch,
November, pp. 337-46.

Fort, M. (1993), ³Customer defined attributes of service quality in the ~BM mid-range
computer software industry´, unpublished MBA dissertation, Manchester Business School,
Manchester.

Francis Buttle, (1996), ³!(
.)4$)A=
;.$%$@0)=
.)#)+.;,
+')&3+B European

Journal of Marketing, Vol. 30 No. 1, pp. 8-32.

Gerrard P.; Cunningham J.B.,³~slamic banking: a study in Singapore´, The ~nternational

Journal of Bank Marketing, October 1997, vol. 15, no. 6, pp. 204-216(13), 0?*$#,).(
Emerald Group Publishing Limited

Grönroos, C. (1982), t
te icc emetcc
eti cicthece
icecect
, Swedish
School of Economics and Business Administration, Helsinki.

Grönroos, C. (1984), ³A service quality model and its marketing implications´, 

pec

cc
eti , Vol. 18, pp. 36-44.

Grönroos, C. (1990), e
icec emetcc
eti , Lexington Books, Toronto, ONT

Grönroos, C. (1993), ³Toward a third phase in service quality research: challenges and
future directions´, in Swartz, T.A., Bowen, D.E. and Brown, S.W. (Eds), cescic
e
icesc
eti cc emet, Vol. 2, JA~ Press, Greenwich, CT, pp. 49-64.

Grönroos, C. (1994), ³From Marketing Mix to Relationship Marketing. Towards a Paradigm

Shift in Marketing´,  emetcecisi, Vol. 32 No. 2, pp. 4-32.

c 58
c c c Discussion

Gulledge, L. (1996), ³Satisfaction measurement is more than doing surveys´, 

eti c
ews, Vol. 30 No. 22, October 22, p. 8.

Hardie, B.G.S., Johnson, E.J. and Fader, P.S. (1992), ³Modelling loss aversion and reference
dependence effects on brand choice´, working paper, Wharton School, University of
Pennsylvania, PA.

Haron, S., Ahmed, N. and Planisek, S. (1994), ³Bank patronage factors of Muslims and non-
Muslim customers´, ~te
tic 
ccc
eti , Volume 12 No. 1, pp. 32-40.

Hedvall, M.-B. and Paltschik, M. (1989), ³An investigation in, and generation of, service
quality concepts´, in Avlonitis, G.J. etc. (Eds), 
eti ch htcc
cticecicthec
s,cEuropean Marketing Academy, Athens, pp. 473-83.

Hegazy, ~.A. (1995), ³An empirical comparative study between ~slamic and commercial
banks¶ selection criteria in Egypt´, ~te
tic 
cctemp

yc emet,
Vol. 5 No. 3, pp. 46-61.

Holliday, K. (1996), ³Keeping close to the customer´, c

eti , Vol. 28 No. 6, pp.
14-19.

Humayon A. Dar, ³Demand for ~slamic Financial Services in the UK: Chasing a Mirage?´.
Lecturer, Department of Economics, Loughborough University, Loughborough,
Leicestershire LE11 TU, UK; phone: +44 1509 222709; fax: +44 1509 223910; email:
M.H.A.Dar@Lboro.ac.uk.

~acobucci D., Ostrom A. L., Braig B. M. and Bezjian-Avery A. (1996), ³A Canonical Model
of Consumer Evaluations and theoretical bases of expectation´, Advances in Service
Marketing and Management, Vol. 5, pp. 1-44, JA~ press ~nc.

~acobucci, D., Grayson, K.A. and Omstrom, A.L. (1994), ³The calculus of service quality
and customer satisfaction: theoretical and empirical differentiation and integration´, in
Swartz, T.A., Bowen, D.E. and Brown, S.W. (Eds), cescice
icesc
eti cc
 emet, Vc,cJA~ Press, Greenwich, CT, pp. 1-68.

~
c(1995a), ³Too successful for it¶s own good: The Co-operative bank´, ~te
tic

cc
eticcist
i tic emet, Vol. 23 No. 11, pp. x-xi.

~
c(1995b), ³Complaints map the Royal Bank of Scotland¶s road to service recovery´,
~te
tic 
cc
eticcist
i tic emet, Vol. 23 No. 11, pp. viii-ix.

Jabnoun, Naceur; Khalifa, Azaddin, ³A customized measure of service quality in the UAE´.
Managing Service Quality, Volume 15, Number 4, April 2005, pp. 374-388(15) 0?*$#,).(
Emerald Group Publishing Limited

c 59
c c c Discussion

James, B.C. (1989),  ityc emetc

cHethc
eceie
y- ityces
emetc
c emetc
 ect, The Hospital Research and Educational Trust, Chicago, ~L.
Javalgi, R.G., Armacost, R.L. and Hosseini, C. (1989), ³Using analytic hierarchy process for
bank management. Analysis of consumer bank selection decision´, 
cc siessc

ese
ch, Vol. 19, pp. 33-49.

John Trethowan, Gerry Scullion, (1997), ³Strategic responses to change in retail banking in
the UK and the ~rish Republic´, ~nternational Journal of Bank Marketing 15/2 [1997] 60±68

Joseph, W.B. (1996), ³~nternal marketing builds services quality´, 

ccHethc
ec

eti , Vol 16 No. 1. 
cc
eti , Vol. 56, July, pp. 55-68.

Joyosumarto, S. (1995). The role of central banks in regulating ~slamic banks in a dual
banking system: the case of ~ndonesia. ~n: Proceedings of the 9th Expert-Level Conference
on ~slamic Banks, Jakarta, ~ndonesia. (pp. 3±17).

Juran, J.M. (1951),  ityct

cH, McGraw-Hill, New York, NY.

Kahneman, D. and Miller, D.T. (1986), ³Norm theory: comparing reality to its alternatives´,
sych icc
eiew, Vol. 93, pp. 136-53

Kaj Storbacka, Tore Strandvik and Christian Grönroos, ³Managing Customer Relationships
for Profit: The Dynamics of Relationship Quality´ ~nternational Journal of Service, ~ndustry
Management, Vol. 5 No. 5, 1994, pp. 21-38,

Karim, R. A. A. (1996b). The impact of the Basle capital adequacy ratio regulation on the
financial and marketing strategies of ~slamic banks´ ~nternational Journal of Bank
Marketing, Vol.14, No. 7, pp. 32-44

Kass, R. (1992), ³A light in Asia Pacific (Part ~~)´, cystemsccech y, Vol. 29
No. 3, pp. 36-44.

Kayis B., Kim H., & Shin T. H., (2003), ³A comparative analysis of cultural, conceptual and
practical constraints on quality management implementations²findings from Australian and
Korean banking industries´, TQM & BUS~NESS EXCELLENCE, VOL. 14, No. 7,
SEPTEMBER, 2003, 765±777.

Kaynak, E. and Yavas, U. (1985), ³Segmenting the banking market by account usage: an
empirical investigation´, 
cc
essice
icec
eti , Vol. 1, pp. 177-88

Keiser, A. (1993), ³Keeping the customer satisfied begins with asking questions´, c
 emet, Vol. 69 No. 10, pp. 48-53.

Khazeh, K. and Decker, W.H. (1992), ³How customers choose banks´, 

cc
etic
i , Vol. 14, pp. 41-4.

c 60
c c c Discussion

Knights, D. and Sturdy, A. (1997) , ³Marketing the soul: from the ideology of consumption
to consumer subjectivity´, in Knights, D. and Tinker, T. (Eds) , Financial ~nstitutions And
Social Transformations, Macmillan, Basingstoke.

Kotler, P. (1994), ³Marketing Management ± Analysis, Planning, ~mplementation, and

Control´, Prentice-Hall, Englewood Cliffs, NJ.

Kotler, P. and Armstrong, G. (1991), 

icipescc
eti , 5th ed. Prentice-Hall,
Englewood Cliffs, NJ.

Laroche, M., Rosenblatt, J. and Manning, T. (1986), ³Services used and factors considered
in selecting a bank´, ~te
tic 
ccc
eti , Vol. 14 No. 1, pp. 35-55.

Leblanc, G. and Nguyen, N. (1988), ³Customers¶ perceptions of service quality in financial

institutions´, ~te
tic 
ccc
eti , Vol. 6 No. 4, pp. 7-18.

Lehtinen, J.R. and Lehtinen, O. (1982), ³Service quality: a study of quality dimensions´,
unpublished working paper, Service Management ~nstitute, Helsinki.

Lewis, B.R. (1993), ³Service quality measurement´, 

eti c~tei ececci ,
Vol. 11 No. 4, pp. 4-12.

Lian, T. (1994a), ³Customer retention through service quality´, c

eti , Vol. 26
No. 1, pp. 15-20.

Lian, T. (1994b), ³Putting together the pieces of service quality´, c

eti , Vol. 26
No. 4, pp. 22-30.

Liljander, V. and Strandvik, T. (1993b), ³Different Comparison Standards as Determinants

of Service Quality´, 
ccs me
ctiscti,cisstiscticcmpii c
ehi
, Vol. 6, pp. 118-32.

Luck D. and Rubin R. (1987), ³Market Research´, Prentice Hall, US, Seventh Edition

M.Y. Khan, 2001, ³Banking Regulations and ~slamic Banks in ~ndia: Status and ~ssues´,
~nternational Journal of ~slamic Financial Services, Volume 2. Number 4, Jan-Mar 2001

Mabid Ali Al-Jarhi, and Munawar ~qbal, (2001), ³~slamic Banking: Answers to Some
Frequently Asked Questions´, ~slamic Development Bank ~slamic Research and Training
~nstitute, !ccsicpe
,cNo.4, 1422H 2001

Madhukar G Angur; Rajan Nataraajan; John S Jahera Jr, ³Service quality in the banking
industry: an assessment in a developing economy´ The ~nternational Journal of Bank
Marketing, Volume: 17, Number: 3, 1999, Page: 116 ± 125
Mahoney, L. (1994), ³Service quality/service excellence´, c
eti , Vol. 26 No. 4, p.
66.

c 61
c c c Discussion

Mangold, G.W. and Babakus, E. (1991), ³Service quality: the front-stage perspective vs the
back stage perspective´, 
cce
icesc
eti , Vol. 5 No. 4, Autumn, pp. 59-70.

Mark R. Nelson, (1999). ³Bank marketing and information technology: a historical analysis
of the post-1970 period´, international journal of bank marketing, Vol. 17, No. 6, pp. 265-
273

Masden, G. (1993), ³Service excellence: a step beyond quality´, c

eti , Vol. 25
No.10, pp. 39-41.

Masser, W.J. (1957), ³The quality manager and quality costs´, ~ st

ic ityct
,
Vol. 14, pp. 5-8.

e
yc"cewis,c#~slam and accounting´, Accounting Forum,
Volume 25, ~ssue 2, Page 103, June 2001

Metawa S.A.; Almossawi M. ³Banking behavior of ~slamic bank customers: perspectives

and implications´, The ~nternational Journal of Bank Marketing, December 1998, vol. 16,
no. 7, pp. 299-313(15), 0?*$#,).( Emerald Group Publishing Limited

Metawally, Samir. 1992. ³ The aggregate balance sheet and results of transactions and
financial indicators for ~slamic banks and financial institutions.´ Journal of ~slamic banking
and finance. 7-61

Morrall, K. (1996), ³Managing a merger without losing customers´, c

eti , Vol.
28 No. 3, pp. 18-23.

Mosad Zineldin, (1996) µBank strategic positioning and some determinants of bank
selection´ ~nternational Journal of Bank Marketing 14/6, 12±22

Motley, L.B. (1994), ³The one-toe punch in marketing strategy´, c

eti , Vol. 26
No. 5, p. 80.

Muhammad Anwar, ³~slamicity of Banking and Modes of ~slamic Banking´, Arab Law
Quarterly, 2003, vol. 18, no. 1, pp. 62-80(19), 0?*$#,).( Brill Academic Publishers

Munawar ~qbal, Ausaf Ahmad, and Tariqullah Khan, (1998) ³Challenges Facing ~slamic
Banking´ Occasional Paper ± No. 1, ~slamic Development Bank, ~slamic Research and
Training ~nstitute, First Edition, 1419H

Naser K.; Jamal A.; Al-Khatib K. ³~slamic banking: a study of customer satisfaction and
preferences in Jordan´, The ~nternational Journal of Bank Marketing, Volume 17, Number 3,
March 1999, pp. 135-151(17), 0?*$#,).( Emerald Group Publishing Limited

c 62
c c c Discussion

Naser K.; Moutinho L., ³Strategic marketing management: the case of ~slamic banks´ The
~nternational Journal of Bank Marketing, October 1997, vol. 15, no. 6, pp. 187-203(17)
0?*$#,).( Emerald Group Publishing Limited
Noe, J. (1996), ³Regaining customer appreciation´, me
ic¶scmm ityce
, Vol. 5
No. 4, pp. 16-20.

Oliver, R.L. (1980), ³A cognitive model of the antecedents and consequences of satisfaction
decisions´, 
cc
eti c
ese
ch, Vol. 17, November, pp. 460-9.

Oliver, R.L. (1993), ³A conceptual model of service quality and service satisfaction:
compatible goals, different concepts´, in Swartz, T.A., Bowen, D.E. and Brown, S.W. (Eds),
cescice
icesc
eti cc emet, Vol. 2, JA~ Press, Greenwich, CT, pp.
65-85.

Parasuraman, A., Berry, L.L. and Zeithaml, V.A. (1990), cmpi

icc$miticc

etishipscicc$teece
icec ityce, Marketing Science ~nstitute,
Cambridge, MA.

Parasuraman, A., Berry, L.L. and Zeithaml, V.A. (1991a), ³Perceived service quality as a
customer based performance measure: an empirical examination of organizational barriers
using an extended service quality model´, H mc
es
cec emet, Vol. 30 No. 3,
Autumn, pp. 335-64.

Parasuraman, A., Zeithaml, V. and Berry, L.L. (1985), ³A conceptual model of service
quality and its implications for future research´, 
cc
etig, Vol. 49, Autumn, pp.
41-50.

Parasuraman, A., Zeithaml, V. and Berry, L.L. (1986), ³SERVQUAL: a multiple-item scale
for measuring customer perceptions of service quality´, Report No. 86-108, Marketing
Science ~nstitute, Cambridge, MA.

Parasuraman, A., Zeithaml, V. and Berry, L.L. (1988), ³SERVQUAL: a multiple-item scale
for measuring consumer perceptions of service quality´, 
cc
etii , Vol. 64,
Spring, pp. 12-40.

Parasuraman, A., Zeithaml, V. and Berry, L.L. (1991b), ³Refinement and reassessment of
the SERVQUAL scale´, 
cc
etii , Vol. 67 No. 4, pp. 420-50.

Parasuraman, A., Zeithaml, V. and Berry, L.L. (1993), ³Research note: more on improving
service quality measurement´, 
cc
etii , Vol. 69 No. 1, Spring, pp. 140-7.

Parasuraman, A., Zeithaml, V. and Berry, L.L. (1994), ³Reassessment of expectations as a

comparison standard in measuring service quality: implications for future research´, 
c
c
eti , Vol. 58, January, pp. 111-24.

c 63
c c c Discussion

Pourian, Heyder, 1995. ³ the experience of ~ran¶s ~slamic financial system and its prospects
for development,´ in development of financial markets in the Arab countries, ~ran and
turkey. Economic research forum For the Arab countries, ~ran and Turkey.

PRAT~BHA A. DABHOLKAR, C. DAV~D SHEPHERD, DAYLE ~. THORPE, ³A

Comprehensive Framework for Service Quality: An ~nvestigation of Critical Conceptual and
Measurement ~ssues through a Longitudinal Study´, Journal of Retailing, Volume 76(2) pp.
139±173, 2000

Ramin, Cooper Maysami, & Kwon, W. Jean, (2000)³An Analysis of ~slamic Takaful
~nsurance ± A Cooperative ~nsurance Mechanism´, Journal of ~nsurance Regulation, Fall
(1999). Obtained on 20th of August 2005, from
http://www.icmif.org/2k4takaful/site/articles.asp

Richard, M.D. and Allaway, A.W. (1993), ³Service quality attributes and choice behavior´,

cce
icec
eti , Vol. 7 No. 1, pp. 59-68.

Rifaat Ahmed Abdel Karim, ³~nternational accounting harmonization, banking regulation,

and ~slamic banks´ The ~nternational Journal of Accounting. Vol. 36, (2001), p-169±193

Rogers, D. (1993). The future of American banking: managing for change, McGraw Hill,
~nc., New York, NY.

Romano, R. and Sanfillippo, B. (1996), ³A total approach: measure sales and service´, e$sc
i , Vol. 85 No. 8, pp. 16-17.

Rose, N. (1999), Powers of freedom: Reframing political thought, Cambridge university

press, Cambridge.

Rosly S.A.; Bakar M.A.A. ³Performance of ~slamic and mainstream banks in Malaysia´,
~nternational Journal of Social Economics, October 2003, vol. 30, no. 12, pp. 1249-
1265(17), 0?*$#,).( Emerald Group Publishing Limited

Ross, D. (1989), ³Your banks and how to chose them´, cc tcy, Vol. 104, p. 130.

Saleh, F. and Ryan, C. (1992), ³Analysing service quality in the hospitality industry using
the SERVQUAL model´, e
icesc~ st
iesc 
, Vol. 11 No. 3, pp. 324-43.

Schlesinger Leonard A., and James L. Heskett (1991), ³Breaking the cycle of failures in
services´ Sloan Management review, (spring), 17-28

Schramm M.; Taube M., ³Evolution and institutional foundation of the hawala financial
system´ ~nternational Review of Financial Analysis, 2003, vol. 12, no. 4, pp. 405-420(16)
0?*$#,).( Elsevier Science

c 64
c c c Discussion

Simon Archer, Rifaat Ahmed Abdel Karim and Talla Al-Deehani, ³Financial Contracting,
Governance Structures and the Accounting Regulation of ~slamic Banks: An Analysis in
Terms of Agency Theory and Transaction Cost Economics´, Journal of Management and
Governance, Volume 2, Number 2 , pages 149 ± 170

Sion, S. (1994), ³Telemarketing brings credit industry to every home´, 

eitc%
, Vol.
83 No. 2, pp. 19-20.

Solomon, M. (1996), s me
cehi
, 2nd ed., Allyn & Bacon, Boston, MA, p. 346.

Spreng, R.A. and Singh, A.K. (1993), ³An empirical assessment of the SERVQUAL scale
and the relationship between service quality and satisfaction´, unpublished manuscript,
Michigan State University, TN.

Tarek S. Zaher and M. Kabir Hassan ³A comparative literature survey of islamic finance and
banking´ Financial markets, ~nstitutions and instruments, V. 10, No. 4, November 2001.
Publisher: Blackwell publishers

Taylor, M., Steven, A. and Baker, T.L. (1994), ³An assessment of the relationship between
service quality and customer satisfaction in the formation of consumers¶ purchase
intentions´, 
cc
etii , Vol. 70 No. 2, pp. 163-78.

Teas, K.R. (1993a), ³Expectations, performance evaluation and consumers¶ perceptions of

quality´, 
cc
eti , Vol. 57 No. 4, pp. 18-24.

Teas, K.R. (1993b), ³Consumer expectations and the measurement of perceived service
quality´, 
cc
essice
icesc
eti , Vol. 8 No. 2, pp. 33-53.

Teas, K.R. (1994), ³Expectations as a comparison standard in measuring service quality: an

assessment of a reassessment´, 
cc
eti , Vol. 58, January, pp. 132-9.

Timur Kuran, (1995) ³Further reflections on the behavioral norms of ~slamic economics´,
Journal of Economic Behavior and Organization, Vol. 27, 159-163

Vavra, T. (1995), ³Selling after the sale´, c

eti , Vol. 27 No. 1, pp. 27-30.

Wason, P.J. and Johnson-Laird, P.N. (1972), sych ycc
esi &ct

ct
ecc
tet,cB.T. Batsford, London.

Waterhouse, K. and Morgan, A. (1994), ³Using research to help keep good customers:
understanding the process of customer defection and developing a strategy for customer
retention!´, 
eti cc
ese
chcy, Vol. 22 No. 3, pp. 181-94.

Wells, W. and Prensky, D. (1996), s me

cehi
, John Wiley & Sons, New York,
NY, p. 411.

c 65
c c c Discussion

White, D. (1994), ³Familiarity breeds content´, i c%

, Vol. 12 No. 5, p. 18.

Wilson, Rodney (ed) (1990), ~slamic Financial Markets, London: Routledge. (1992),
nd
³~slamic Banking and Finance´, in The Middle East and North Africa 32 Edition, London:
Europa Publications. Working paper, ~nternational Monetary Fund.

Wotruba, T.R. and Tyagi, P.K. (1991), ³Met expectations and turnover in direct selling´,

cc
eti , Vol. 55, pp. 24-35.

Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1991), ³The nature and determinants of
customer expectations of service´, working paper 91-113, Marketing Science ~nstitute,
Cambridge, MA.

c 66