Developing a Scale for Measuring Non-Financial Service Performance of Islamic Banks in Pakistan

Abstract

The intention of this research is to develop a measure by which non-financial service performance of Islamic banks can be analyzed. Research methodology comprises of qualitative and quantitative phase. Simple random sampling has been applied to select Islamic banks branches from Multan. In qualitative phase through purposive sampling 10 in depth interviewees were conducted from managerial employees with the help of interviewee guide and scale items were generated to explore non-financial service performance elements. A questionnaire was developed and self-administered questionnaire based survey was performed in quantitative phase. Out of 150 distributed questionnaire 111 complete responses were received and analyzed by applying exploratory and conformity factor analysis with the help of software Smart-PLS. Findings of the study suggests that key performance indicators of Islamic banks are non-financial in nature .Scale contained 40 items. Total 6 factors with Eigenvalues > 1 containing 40 items with factor loading >.7 were extracted and total variance explained was 80%. Variance explained by each factor is as follows 1.Marketin and Sharia board performance, (15items 29.9%)2 Training(7items12.78%), 3.Corporate social responsibility(5items 11.43%) 4.Operational performance(5 items 9.6% VA), 5.Management commitment(4 items and 9.0% VA)and 6.Employee commitment (4 items and 7.16% VA). This research in the form of the scale provides a detail, reliable measure by which non-financial performance of Islamic banking can be comparatively analyzed at bank and branch level. Future corners of improvements can be identified which will result in increasing customer satisfaction, employee satisfaction and service quality improvements.