Abstract
This study examines the relationship between service quality and customer satisfaction regarding Islamic banks as well as conventional banks in Pakistan. It also investigated how service quality affects customer satisfaction by assessing the magnitude of the relationship between selected variables. This study is important due to an emerging trend of Islamic banking practices in Pakistan in the existence of conventional banking system. Data were collected from 720 bank customers by using stratified random sampling. The results reflect that there is strong positive relationship between service quality and customer satisfaction in case of Islamic banks as well as in case of conventional banks. Findings showed that there is stronger positive relationship between service quality and customer satisfaction in Islamic banks as compared to Conventional banks in Pakistan. The study has a number of implications for bankers, policy makers and academicians. Key words: Islamic Banking, Bank Customers, Service Quality, Customer Satisfaction,Pakistan, Conventional bank
Highlights
Banks are performing multiple functions to provide a variety of products and service for different segments of the economy
The population of the study consists of the customers of Islamic banks and conventional banks operating in Pakistan
The distribution of customers according to age reflects that young and mature people (25-34) are more interested to interact with Islamic bank (IB) while young people (18-24 years) are inclined towards conventional bank (CB)
Summary
Banks are performing multiple functions to provide a variety of products and service for different segments of the economy. Nationalized banks showed very poor performance due to inferior products/services that resulted into the privatization of banking sector in 1992. Islamic banks are new entrants in the Pakistani banking industry and require a comparative study to assess the performance of their operations and products/services. The 21st century came with blending of opportunities and threats for the banking sector due to inception of Islamic banking practices in different countries like Malaysia, Pakistan, Bangladesh, Bahrain and even in non-Muslim parts of the globe. It was empirically verified that Islamic banking system showed excellent performance by supporting financial sector in Tunisia (Darrat, 1988). There is an empirical evidence to find out the influence of Islamic banking practices on monetary stability of Iran. The study showed mixed results, both for some evidence in favor to support and stabilize monetary system and somewhat against it (Yousefi, Abizadeh and Mccormick, 1997)
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