Islamic Banking Services Research Articles

The impact of Islamic Shariah compliance on customer satisfaction in Islamic banking services: mediating role of service quality

PurposeThe purpose of this paper is to investigate the impact of Islamic Shariah compliance on customer satisfaction through the mediating effect of service quality in Islamic banking services.Design/methodology/approachA total of 334 completed and usable questionnaires were collected from customers of Islamic banks in Bangladesh to test the hypotheses. The data were analyzed using SmartPLS 3.FindingsThe findings of this study indicate that Islamic Shariah compliance has a positive and significant influence on service quality and customer satisfaction of Islamic banking services. The research findings also indicate that service quality partially mediate the relationship between Islamic Shariah compliance and customer satisfaction of Islamic banking services.Research limitations/implicationsThis study only emphasized on the Islamic banking services of Bangladesh and thus findings of the present study may not be applicable to other service areas.Practical implicationsThe implications of the research are twofold. First, a strong standardized effect of Islamic Shariah compliance on service quality implies that customers are very sensitive to Shariah compliance related to Islamic banking services. Next, maintaining service quality is another crucial aspect to satisfy customers of Islamic banks. Quality of services will only be materialized when all the promises made by the bank function accordingly. Therefore, strategy makers of Islamic banks should assess the customer service quality and satisfaction regularly to improve the overall service experience of customers.Originality/valueLimited studies have been conducted to investigate the mediating effect of service quality on the relationship between Shariah compliance and customer satisfaction in Islamic banking services. This study provides valuable insights to Islamic bank to integrate the service quality along with Shariah compliance to enhance customer satisfaction.

Analisis Pengaruh Layanan Digital Perbankan Syariah terhadap Literasi Keuangan Syariah Generasi Milenial

Good financial literacy, especially in the digital era now is important to be understood by millennials. The digitization of Islamic which is able to provide more efficient, safer, faster financial products and the risk of losing money is less well understood by this generation. Islamic digital banking services like mobile banking and internet banking, which describe the virtual process to support all services, are expected to be able to significantly increase the level of Islamic banking literacy and have a positive impact on business growth in general. This study used a quantitative descriptive research design. The sampling method used purposive sampling method. Data was obtained by using questionnaire which was distributed to 100 millennial respondents who used m-banking or i-banking in Kudus. The answers to the questionnaire were measured using a rating scale, then data was analysed by multiple linear regression. The results showed that m-banking and i-banking had a significant and positive effect to the literacy of millennials about Islamic banks in Kudus. It was proven by a significance value of 0.000 (p <0.05). The R-square value is 0.775, which means the contribution of the influence provided by m-banking and i-banking services to millennials Islamic financial literacy in Kudus is 77.5%, while the remaining 22.5% is influenced by other variables.

Islamic Banking Service Innovation in Customer Co-Creation: Its Impact on Customer Trust, Satisfaction, and Loyalty

This study examines the impact of co-creation on customer trust, satisfaction, and loyalty in the context of Islamic banks, the relationship between co-creation and customer satisfaction and loyalty mediated by trust and customer satisfaction. 379 Islamic bank customers data were analyzed using variance-based structural equation modeling to test the nine hypotheses proposed. The study results found that customer co-creation positively influences customer trust and satisfaction, which further implicates loyalty. However, surprisingly co-creation does not affect Islamic bank customer loyalty. Islamic bank managers in Indonesia need to involve customers to participate in value co-creation. Because Islamic bank's customer loyalty relationship with co-creation is mediated in full by trust and satisfaction, this research is the first empirical investigation that tests customer co-creation in an integrated manner and its implications on trust, satisfaction, and customer loyalty in the Islamic bank industry.

Customers’ Satisfaction Level of Islamic Banking Service in Kelantan, Malaysia

This study aimed to identify the customers’ satisfaction level of Islamic banking in Kelantan. Specifically, this study tested the relationship between customer satisfaction and service quality in the districts of Machang and Tanah Merah, Kelantan, using the CARTER model. It utilized the quantitative analysis method involving the descriptive analysis and inferential analysis. The respondents were 384 customers of Islamic banking in Kelantan by using a simple random sampling method. The findings indicated that all the service quality variables such as compliance, reliability, assurance, tangibles, empathy, and responsiveness had a correlational relationship with customer satisfaction influence. However, based on the regression analysis, it was found that only the responsiveness, empathy and reliability variables were significant in influencing customer satisfaction. As such, the Islamic banking institution should upgrade its service quality, especially in the aspects of responsiveness, empathy, and reliability.

Analisis Pengaruh Pengetahuan, Kepribadian, dan Reputasi Terhadap Keputusan Masyarakat Memilih Bank Syariah di Banda Aceh

The study was conducted to determine the effect of knowledge, personality and reputation on people's decisions to choose Islamic banks. The research subjects were all people of Banda Aceh city in early 2020 as many as 270.321 people using the Slovin formula with cluster random sampling technique representing 9 sub districts total 100 respondents using Islamic banking services. The data analysis technique uses linear regression to answer the proposed hypothesis. The results show that all independent variables of knowledge, personality and reputation influence the variables related to the customers decision to choose Islamic bank in the city of Banda Aceh.

Customer Adoption of Islamic Banking Services: Empirical Evidence from Indonesia

Customer Adoption of Islamic Banking Services: Empirical Evidence from Indonesia

Factors Affecting the Intentions to use Islamic Banking among Christian Community in Pakistan

Islamic banking is not only a worldwide evolving phenomenon but also it is booming day by day in Pakistan. Slight research is directed to study the intentions from the perspectives of Christian personnel for the usage of Islamic banks' products and services in Pakistan. The current paper intends to address the research gap in the literature by discovering the perceptions of Christian clients to gain insights so that Islamic banks may target them also. Consequently, the focus of this research is to assess various influencing on the intentions of the Christian community in Pakistan towards Islamic banking. Primary data has been collected through 400 questionnaires distributed amongst Christian community residents of Punjab, Pakistan. The research is limited to only one religion Christianity, while bank employees and management is not touched. Decomposed theory of planned behavior is applied in our study and contributes that all independent variables have a significant impact on intention except religious norms, relative advantage, and self-efficacy

Islamic Banking Products, Services and Objectives: Perspectives of Shariah Supervisors and Regulators

The study is aimed at assessing the opinions of vital Islamic banking stakeholders including members of various Islamic banking Shariah Supervisory Boards (SSBs) and pertinent personnel from Pakistan’s central bank – The State Bank of Pakistan (SBP). The research analyzes the percepts of respondents regarding various aspects relevant to Islamic banking (IB) products, service and objectives. The paper employs qualitative research approach in analyzing the Shariah and regulatory experts’ viewpoints regarding Islamic banking. The study is conducted using semi-structured interviews of twelve Shariah supervisors and nine SBP staff members serving in the Islamic banking department and Islamic banking focus groups in the regional/field offices of the State Bank of Pakistan. The study is of pioneering nature involving qualitative research design and inclusion of two of the most significant stakeholder groups from the Islamic banking sector of Pakistan who have not been included in the past studies regarding Islamic banking perceptions. The research findings highlighted that Shariah objectives are top priority of Islamic banks as per the views expressed by members of Shariah boards of various banks while in opinion of Islamic banking regulators, Islamic banks’ major concern is to achieve their business objectives. Keywords: Islamic Banking, Islamic Finance, Pakistan, Products, Perceptions, Shariah Compliance.

Examining the Nexus between Riba and Gharar, and Islamic Banking Products Among Zanzibar People

This paper aims at examining the nexus between riba, gharar and income level, and Islamic Banking Products among Zanzibar people. The Islamic bank products such as Murabahah, Musharakah, Mudarabah, Ijarah, Hawalah, Takaful and Sukuk were considered as independent variables for this study. On the other hand, the dependent variables investigated were three (3) namely riba, gharar and income level. A total of 116 respondents consisting of Zanzibar people residing in different districts responded to the survey questionnaire via google form. The study used statistical techniques to analyse the collected data in terms of demographic, descriptive, reliability and validity analysis and presented by charts, tables and curves. The hypothesis test has been conducted using correlation analysis. Statistically, the finding revealed that, the people of Zanzibar were against Riba but in favour of Murabahah, Musharakah, Mudarabah, Ijarah, Hawalah, Takaful and Sukuk with p≤0.01. The result also revealed that the people of Zanzibar were against gharar with p≤0.01. On the other hand, income level showed a significant correlation against Mudarabah, Ijarah, Hawalal, Takaful and Sukuk as p≤0.01. These findings suggest that the products and services of Islamic banks have a significant relationship with Riba, Gharar and level of income for Islamic banks’ shariah priority. It is also shown that riba and gharar were significantly impacted the people of Zanzibar for the influence on the acquisition of Islamic bank facilities which are vital on direct effects that attract customers and investors in which they are customised from conventional banks products. As the awareness level from these Islamic products are high, it is recommended that Islamic banks should focus in designing Islamic banks products (Murabahah, Musharakah, Mudarabah, Ijarah, Hawalah, Takaful and Sukuk) that will comply with Shariah requirement.

Determinants of Islamic banking products and services adoption in Morocco: a conceptual framework

PurposeThe Moroccan monetary authorities have implemented an Islamic banking system since 2017 as an alternative to the conventional system. However, the adoption of Islamic banking products and services is not widely accepted by customers. The purpose of this study is to propose a conceptual framework to understand the determinants of Islamic banking products and services adoption in Morocco.Design/methodology/approachThis study develops a conceptual framework based on the diffusion of innovation theory (DOI). Thus, with reference to an extensive literature review done regarding adoption studies, the proposed research model integrates perceived attributes of innovation (relative advantage, compatibility, complexity and observability) suggested by the DOI theory. It also integrates other relevant variables that should be considered in the context of this study. These include knowledge, perceived risk and customer involvement.FindingsThe proposed conceptual framework demonstrates and justifies the relevance and the applicability of Rogers’ DOI to understand consumer decisions to adopt an innovation in general as well as Islamic banks in particular.Originality/valueSeveral studies have examined the factors influencing the adoption of Islamic banks; however, those carried out in the Moroccan context remain very limited. The majority of these studies examine the intention to adopt in the future, whereas the present study seeks to establish a conceptual research model that examines the determinants of current adoption of Islamic banking in Morocco and the continuity of this adoption over time. The novelty of this study is to develop a modified model based on DOI theory which, according to the existing literature, has not yet been tested in the Moroccan context.

Customers’ Perceptions toward Islamic Banking in the Gulf Region

In the past decade, Islamic banking (IB) has seen incredible growth. The purpose of this study is to determine the factors affecting perceptions of customers to adopt Islamic banking and finance. The primary data is collected through a questionnaire survey, conducted amongst university students and bank employees from three Gulf Cooperation Council (GCC) countries (UAE, Kuwait, and Saudi Arabia). This study applies a regression model by analyzing understanding (U), awareness (A), religious inspiration (RI), customer innovativeness (CI), and perceived risk (PR) as independent variables and customer perception (CP) as a dependent variable. The results indicate inclusively that perceptions of customers are optimistic regarding Islamic banking and finance. The findings reveal that all independent constructs significantly influence the perceptions of customers about Islamic financing. Resultantly, the research outputs have significant implications for Islamic regulatory bodies. The foremost implication of this research is to promote academic linkages with the banking sector, i.e. to conduct research studies related to customers’ perceptions about Islamic banking in other GCC countries. This research contributes to enhancing the theoretical perspective of customers’ perception to consider Islamic banking services and gives practical suggestions to help marketers of Islamic banks to maximize outreach. Moreover, the results can serve as a directive factor for future studies.

Islamic Banking, A Potential Banking System for India

Islamic banking is one of the fastest developing banking systems in the financial sector, with vast opportunities worldwide. Islamic banking operates by focussing on complete transparency, ethical investment avenues, co-operative businesses, risk sharing that attract not only the followers of Islam but people from other faiths also. Considering the growth Internationally–Islamic banking has become one of the fastest-growing segments in the International markets as well as Capital markets. With around 195 million Muslims approximately, India’s Muslim population is about the world’s third-largest and the world’s largest Muslim-minority population. India is home to 10.3% of the world’s Muslim population. Islamic banking system operates strictly by the Shariah laws which prohibit collection or payment of Interest, known as “Riba”. The Islamic banking system also prohibits investments in businesses or ventures that are considered Unlawful or Haraam. Risk bearing is one of the most basic principles based on which the Islamic banking system works, which relates to trading rather than risk transfer as in the case of conventional banking. The research papers aim at explaining the services of Islamic banking and various principles of Islamic banking. The research also intends to put forward the benefits and drawbacks of Islamic banking in the Indian context.

Impact of Corporate Social Responsibility on Islamic Banking Customers of Pakistan

This study aims to analyze the impact of corporate social responsibility on trust level of customers in the Islamic banking industry of Pakistan. The impact of trust is further studied on customers’ repurchase intentions and their word of mouth intentions. A self-administered questionnaire was used to collect data from the customers of five different banks offering Islamic banking services in Pakistan. In order to explain the relationship between variables the model was tested using Structural Equation Modeling (SEM) using AMOS. Empirical results from this study show that CSR is positively related to customer trust, repurchase intentions and word of mouth intentions in the Islamic banking industry. The findings prove that hypothesized model fit reasonably well based on comparison fit indices. The study adds valuable insights to CSR related research in South Asia and particularly focuses on the factors that influence perceptions and behaviors of Islamic banking customers.

Millennial Experience with Mobile Banking and Mobile Banking Artificial Intelligence Evidence from Islamic Banking

This study examines the factors that influence the attitudes and perceptions of the millennial generation towards the use of mobile banking services and artificial intelligence-based mobile banking services. The research questionnaire is distributed using Google Form to customers using Islamic banking mobile banking services in three cities in Aceh Province, Indonesia, namely; Banda Aceh, Langsa, and Lhokseumawe with a total sample of 204 Muslim millennial generation respondents. Partial least square (PLS) is used to test technology-based differential effects (attitudes towards artificial intelligence, relative advantage, trust and security of mobile banking) and non-technology based (need for service, quality of service) as well as factors of religiosity on the use of mobile banking services and artificial intelligence mobile banking service. This study results in the findings that the construct of trust, attitudes towards artificial intelligence, religiosity, and relative advantage are the main determinants of mobile banking adoption intentions and also show the gap between millennial generation customers in trust levels, attitudes towards artificial intelligence, religiosity and perceived relative advantage between the two dependent variables. Finally, the trust construct has the greatest impact on the use of mobile banking and artificial intelligence services.

Factors propelling the use of Islamic banking services: the moderating role of customer intimacy

This study investigates factors propelling use of Islamic banking products and services. The present study develops an amalgamated model with the help of cognitive and emotional factors to investigate customer satisfaction and loyalty towards use of Islamic banking services. Data was collected from Islamic banking customers and empirically tested using structural equation modelling (SEM). Findings reveal that customer satisfaction was jointly predicted by awareness, reputation, compatibility, complexity, trust and commitment and explained R2 78.7% variance in Islamic banking customer satisfaction. On the flipside customer loyalty was predicted by customer satisfaction and customer intimacy and depicted R2 20.6% variance in customer loyalty. Extending to this, the present study confirmed the moderating role of customer intimacy wherein positive relationship between customer satisfaction and customer loyalty will be stronger when customer intimacy is higher. Finally, research limitations and future research direction are discussed.

The influence of intellectual capital and corporate governance on financial performance of Islamic banks

Purpose - This study aims to analyze the effect of intellectual capital, independent directors, academic directors, and sharia supervisory boards on the financial performance of Islamic banks. The selection of samples observation based on the database of Best Islamic Financial Institutions Award, includes Afghanistan, Algeria, Bahrain, Bangladesh, Brunei Darussalam, Egypt, Indonesia, Jordan, Kazakhstan, Kuwait, Lebanon, Malaysia, Maroko, Nigeria, Oman, Pakistan, Palestine, Qatar, Saudi Arabia, Singapore, South Africa, Sri Lanka, Thailand, Tunisia, Turkey, and Uni Emirate Arab. Methodology - This study uses a sample of 20 Islamic banks in several countries which received the "Best Islamic Financial Institutions Award 2018" by Global Finance Magazine and has published financial reports for the period of 2013-2017. This study adopted panel regression analysis and utilized the Random Effect Model.Findings - The results of the study prove that intellectual capital has a positive effect on financial performance. While independent directors, academic directors, and the Sharia Supervisory Board (SSB) have no effect on the financial performance of Islamic banking companies. These results indicate that intellectual capital is a force for Islamic banking to increase company value through financial performance. While the factors related to corporate governance tend to reduce performance due to several limitations for management in carrying out its operational activities.Research limitations – this study has a limitation in using Islamic banking data from various countries with backgrounds that are certainly different from one another which might be bias. Practical implications – This study suggest that management needs to allocate its resources to provide guidance and development of human resources through regular training in the field of fiqh muamalah, contemporary Islamic banking products and services, effective business communication, as well as extensive market knowledge to anticipate the competition in ways that are in accordance with the principles of sharia.Originality – This research fills a research gap in investigating the nexus of intellectual capital and corporate governance mechanism on Islamic banking performance which has not been discussed in previous papers, particularly using Islamic banking in several countries that are committed to develop the Islamic financial industry.

The potential of digital banking to handle the Covid-19 pandemic crisis: Modification of UTAUT model for Islamic finance industry

Purpose – This research aims to examine the driving factors for the adoption of digital banking of Islamic banks during the COVID-19 pandemic, to explore the development of specific UTAUT2 model for Islamic financial technology, and to investigate factors that need to be improved in digital banking services of Islamic banks based on customer perspectives.Methodology – This research is divided into three. The first study is an empirical testing of UTAUT2 model modified by adding trust and satisfaction variables. The second study is an exploratory study of potential construct for the development of UTAUT model in Islamic Financial Technology. Third, it is an exploratory study aiming to identify problems and to search for policy advice to improve digital banking service of Islamic banks. This research used self-administered survey that involved 845 respondents from several cities in Indonesia. Open and closed question design was used to obtain complementary data. After that, the data were analyzed using SEM-PLS 7.0 and SPSS 23.Findings – The results of this study shows that people have trust, acceptance, and satisfaction on the digital banking service of Islamic banking technology. There are seven hypotheses in this study supported empirically. There are 20 factors that became the main reasons of customers to use the digital banking service of Islamic banking technology and 32 factors that needed to be improved by Islamic banks based on the customers’ perspective. After that, the researcher grouped them into seven policy advices for digital banking service of Islamic banking technology, where these factors can be taken into consideration to improve the competitiveness of the Islamic Finance Industry in Indonesia.Originality – In addition to testing and modifying the UTAUT2 model during the COVID-19 pandemic, this study also explores the possibility of new variables arising from customers’ perception, where the data will be used to submit new variables/models that are more specific to the acceptance of Islamic financial technology. Furthermore, this study also aims to explore several obstacles in the digital banking service of Islamic banking technology.

Awareness, Understanding, and Usage of Islamic Banking Products and Services: A Case of Customers' Satisfaction Towards Islamic Banking in Pakistan

The Islamic banking sectors in Pakistan are experiencing a challenging phase of progress due to intense competition with conventional banks. The primary purpose of this study is to articulate the literature of Islamic banking in Pakistan by investigating the influence of the level of awareness, understanding and usage of Islamic banking products and services on the satisfaction level of its account holders. For achieving this objective, a sample of 400 respondents is chosen through purposive sampling technique from the target population from Islamic banks in Pakistan. The calculated results of PLS-SEM Bootstrapping and SPSS revealed a significant and positive influence of the awareness and understanding level of account holders of Islamic banks on their satisfaction levels. However, the Islamic bank usage by account holders has no impact on their satisfaction level due to the provision of less innovative products and services as compared to conventional banks. This study thus enhances the literature regarding the aforementioned aspects of customer satisfaction. It simultaneously draws an attention to the area that is suitable for the prosperity and progress of the Islamic banking system of Pakistan. The results of this study also give valuable information and helpful guidelines for Islamic banks to formulate innovative strategies of products and promotional policies to retain and attract potential customers. Though this study is broadening the scope of Islamic banking literature, it is not considering the scenario of conventional banks. Islamic banks can manage and enjoy the competitive edge if similar information about conventional banking is available for comparison purposes, which provides the scope of study in future research.

COVID-19 and Islamic Banking Services: Digitalisation as a Post-Crisis Solution (Case of Morocco)

Movement restrictions and the resulting social distancing, as measures to flatten the curve of the spread of coronavirus disease 2019 (COVID-19), highlighted 'electronic business models' (e-BM) as well as the importance of digital transformation of banking services. This article aims to empirically explore the new business opportunities offered by the digitalization of Islamic banking services as a solution to revitalize post-COVID-19 activity and overcome the difficulties of the period. The article presents the results of an opinion survey conducted among Moroccan citizens to collect and analyze their perceptions and expectations about the digital transformation of participatory banking services. This is the first exploratory study in Morocco focused on customer’s expectations regarding the digitalization of participatory banking services. The results of the survey highlighted a significant interest from customers and prospects for digital transformation of the services offered by the actors of this new banking industry, in particular through mobile banking application. However, there is still a part that prefers traditional on-site banking services .Furthermore, digital transformation also presents some risks such as cyber security and issues of non-compliance with banking regulations relating to opening a bank account remotely. To manage these risks and reshape their BM, it is recommended that participatory banking institutions set up an integrated digital strategy, improve their internal processes and equip themselves with a robust, interactive and locked information system.

The Determinants of The Bank Regulation and Supervision on The Efficiency of Islamic Banks in Different Country’s Income Level

This study investigates the impact of the country's governance on the revenue efficiency of 108 Islamic banks from 26 countries offering Islamic banking and finance products services. The technical efficiencies of individual Islamic banks have been analyzed using the Data Envelopment Analysis method. The data will be pooled across the selected countries and utilize the intermediation approach. The Ordinary Least Square estimation method is employed to examine the impact of country supervision and regulation on the technical efficiency of Islamic banks. As robustness check, the study examines the impact of the level of bank regulations and supervision on the efficiency of Islamic banks operating in different income-level countries. The results found that the stricter the supervisory power, the less strict capital requirement, the tighter the restrictions on non-banking activities, and the stricter the private monitoring enhance statistically significantly the level of efficiency of Islamic banks. In upgrading the regulations and supervision of the Islamic banks, the existing regulatory framework based on the Basel Committee on Banking Supervision (BCBS) must be complemented with the prescriptions on Islamic banking or Shariah compliance diligently, so that the Islamic banks could be regulated accurately and further improve the technical efficiency of their operations.