Testing a model of Islamic banking based on service quality, customer satisfaction and bank performance

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Summary of the relationship among Slty, CrSn and Ipfc based on PLS results. Link Coefficients T-values R 2 Slty->Crsn 0.864 59.600 0.746 CrSn-> Iprf -0.234 -1.9373 0.015 Slty->IPRF 0.232 1.735 0.015 to examine the significance of relationships among service quality, customer satisfaction and bank performance. The coefficients are shown in Table 1. Table 1 shows the relationship between the constructs and variables of the study. It reflects the coefficients, t-values and R 2 for service quality, customer satisfaction and performance of Islamic banks. There is a strong positive relationship between service quality and cus-tomer satisfaction, while weak relationship is observed between service quality and performance of Islamic banks. The results are in line with the previous studies as strong positive relationship is reported between service quality and customer satisfaction among customers of Islamic banks in Pakistan (Ahmad et al., 2010). Interestingly, a weak negative relationship is found between customer satisfaction and bank performance. The results show that service quality significantly affects customer satisfaction as shown by path coefficients in the structural model of Figure 2, but customer satisfaction does not affect the performance of the Islamic banks that is evident from path coefficients. So, the results reject the null hypothesis because customer satisfaction does not mediate the relationship between service quality and performance of Islamic banks. The results are consistent with the existing literature as PLS is applied by researchers as an effective estimation procedure across the globe (Maikranz et al., 2007). It helps to estimate the relationship among variables and constructs by producing path coefficients (Fu, 2006). Path coefficients are used to estimate the mediating role of customer satisfaction regarding selected variables (Moutinho and Smith, 2000; Maxham and Netemeyer, 2003) and the mediating role of customer satisfaction with reference to service quality and financial performance of the banks (Al-Hawari and Ward, 2006). It is found that there is weak positive relationship between service quality and customer satisfaction regarding Islamic banks. Interestingly, it is found that there is weak negative relationship between customer satisfaction and performance of the Islamic banks. It identified the gap prevailing in the Pakistani banking sector towards lack of customer orientation and awareness among bank customers. It could be linked with the findings that customers of Islamic banks have awareness, but showed dissatisfaction regarding some of the products of Islamic banks (Naser et al., 1999). The findings showed that customer satisfaction does not mediate between service quality and bank performance in the case of Islamic banks due to lack of customer orientation and awareness campaigns. The path coefficients of the structural model (Figure 2) represents that customer satisfaction does not play a mediating role between service quality and performance of Islamic banks. It is consistent with literature as customer satisfaction does not mediate between service quality and tangible aspects of the service environment (Jamal and Naser, 2002). It is also supported by other studies (Maxham, 2003; Bontis et al., 2007).