Essays on Service Quality in Islamic and Conventional Banking in the Middle East Case Study

Download full paperFile format: .doc, available for editing

The paper 'Service Quality in Islamic And Conventional Banking in the Middle East" is a perfect example of a marketing case study.   Purpose: The aim of this paper is to review some of the key studies on banking service quality with particular attention to the Middle East and GCC countries that were published in the last three decades, and provide some future research directions. Methodology: a Literature review. Findings: Our review generated 11 research questions both for Islamic and conventional banking services of the Middle Eastern countries. Research Limitations/Implications: This paper reviews leading and current studies that are relevant, and provides future research directions for researchers and practitioners alike.

Future research should address each of the research questions as identified in this paper with empirical data/evidence. Originality Value: This paper would be useful for the researchers and practitioners in guiding their research questions, and answers to all of the research questions as identified in this paper could strengthen the banking industry in the Middle Eastern countries. Keywords: Service Quality, Middle East, Islamic Banking, Conventional Banking, Research Agenda, Literature Review. Paper Type: a Literature review. Introduction There are two types of banking systems that are currently in operation in most of the Middle Eastern and Gulf Cooperation Council (GCC) countries, and these are referred to as conventional and Islamic banking systems.

Conventional banks were established prior to Islamic banks and are guided by capitalist principles of the Western world that emphasize on wealth/profit maximization (Olson & Zoubi, 2008). In the early years of the Middle Eastern banking, most conventional banks were established as branches of large international banks originated in the European countries. For instance, the first commercial banking institution in Saudi Arabia was opened in the Port of Jeddah in 1927 and this was a branch of the Netherlands trading society.

Later, in the 1950s, the local commercial banks (e. g., Riyadh Bank, National Commercial Bank) were established in Saudi Arabia (Yavas, 1988). Islamic banking systems are often regarded as an alternative to conventional banking systems in the Middle East and GCC countries. The history of Islamic banking can be traced the back to early 1970s, the establishment of the Nasser Social Bank in Egypt. The research found that there were roughly 35 Islamic banks in various countries throughout the Middle East in 1985 (Erol & El-Bdour, 1989); and by 2009 Islamic banks spread over 50 countries (Hanif, 2010).

It is estimated that the annual growth rate of the Islamic banking industry was 8.2 percent during the 1990s. This growth spread from the Middle East to the countries in Europe, Africa, and Asia. As a result, the worldwide Islamic banking industry grew at a rate of 30% between 2004 and 2008 (GatehouseBank, 2008; Khan and Bhatti, 2008). This growth caused global conventional banks like HSBC, Citibank, and Standard Chartered bank to offer Islamic banking services to its target customers (Al-Smadi et al. , 2013; Naser et al. , 1999). Although Islamic and conventional banks operate in the same market, their respective growth rates, profitability, and assets vary markedly.

This discrepancy is particularly pronounced in the Middle Eastern and GCC countries. Although conventional banks typically possess greater assets than Islamic banks, the growth rates of Islamic banks are higher than that of the conventional banks. In this context, Hanif (2010) estimated that the Islamic banking volume had reached US$951 billion and that the Islamic banks had been operated in over 50 countries in 2009.

Similarly, Siraj and Sudarsanan (2012) found that the operating profit of Islamic banks had a faster growth rate than that of conventional banks. Furthermore, according to Siraj and Sudarsanan (2012), Islamic banks have consistently reported a higher return on assets (ROA) than conventional banks. A further review of customer total liability and deposits between 2006 and 2010 revealed a higher percentage of equity funds in Islamic banks (average 74 per cent) than in conventional banks (average 55 per cent) (Siraj & Sudarsanan, 2012).

References

Abdullah, F., Suhaimi, R., Saban, G., & Hamali, J. (2011). ‘Bank Service Quality (BSQ) IndexAn indicator of service performance’. International Journal of Quality & Reliability Management, 28(5), 542.

Abedifar, P., Molyneux, P., & Tarazi, A. (2011). Risk and Stability in Islamic Banking. Bangor: Bangor Business School, University of Wales.

Abedniya, A., Zaeim, M., & Hakimi, B. (2011). ‘Investigating the relationship between customers’ perceived service quality and satisfaction: Islamic Bank in Malaysia’. European J Soc Sci, 21(4), 603-624.

Aburoub, A. S., Hersh, A. M., & Aladwan, K. (2011). ‘Relationship between internal marketing and service quality with customers' satisfaction’. International Journal of Marketing Studies, 3(2), 107.

Al-Ajmi, J., Hussain, H. A., & Al-Saleh, N. (2009). ‘Clients of conventional and Islamic banks in Bahrain: How they choose which bank to patronize’. International Journal of Social Economics, 36(11), 1086-1112.

Al-Eisa, A. S., & Alhemoud, A. M. (2009). ‘Using a multiple-attribute approach for measuring customer satisfaction with retail banking services in Kuwait’. International Journal of Bank Marketing, 27(4), 294-314.

Al-Smadi, A. A.-M., Hamdan, F., & Almsafir, M. K. (2013). ‘Islamic banking vs conventional Banking during the Global Financial Crisis: Malaysia as a case’. Journal of Islamic and Human Advanced Research,3(1), 27-40.

Al-Tamimi, H. A. H., & Al-Amiri, A. (2003). ‘Analysing service quality in the UAE Islamic banks’. Journal of Financial Services Marketing, 8(2), 119-132.

Al-Wugayan, A., Pleshko, L. P., & Baqer, S. M. (2008). ‘An investigation of the relationships among consumer satisfaction, loyalty, and market share in Kuwaiti loan services’. Journal of Financial Services Marketing, 13(2), 95-106.

Aldlaigan, A. H., & Buttle, F. A. (2002). ‘SYSTRA-SQ: a new measure of bank service quality’. International Journal of Service Industry Management, 13(4), 362-381.

Amin, M., & Isa, Z. (2008). ‘An examination of the relationship between service quality perception and customer satisfaction: a SEM approach towards Malaysian Islamic banking’. International Journal of Islamic and Middle Eastern Finance and Management, 1(3), 191-209.

Anderson, W. T., Cox, E. P., & Fulcher, D. G. (1976). ‘Bank selection decisions and market segmentation’. The Journal of Marketing, 40(1), 40-45.

Ansari, S., & Rehman, A. (2011). Financial performance of islamic and conventional banks in Pakistan: A comparative study. Paper presented at the 8th International Conference on Islamic Economics and Finance.

Askari, H., Iqbal, Z., & Mirakhor, A. (2009). Globalization and islamic finance: convergence, prospects and challenges (Vol. 778) New York: John Wiley & Sons.

Avkiran, N. K. (1994). ‘Developing an instrument to measure customer service quality in branch banking’. International Journal of Bank Marketing, 12(6), 10-18.

Avkiran, N. K. (1999). ‘Quality customer service demands human contact’. International Journal of Bank Marketing, 17(2), 61-74.

Awan, A. G. (2009). Comparison of Islamic and Conventional Banking in Pakistan. Proceeding of the 2nd CBRC, Lahore, November 14.

Bahia, K., & Nantel, J. (2000). ‘A reliable and valid measurement scale for the perceived service quality of banks’. International Journal of Bank Marketing, 18(2), 84-91.

Benamraoui, A. (2008). ‘Islamic banking: the case of Algeria’. International Journal of Islamic and Middle Eastern Finance and Management, 1(2), 113-131.

Bloemer, J., De Ruyter, K., & Peeters, P. (1998). ‘Investigating drivers of bank loyalty: the complex relationship between image, service quality and satisfaction’. International Journal of Bank Marketing, 16(7), 276-286.

Chaker, M. N., & Jabnoun, N. (2010). ‘Barriers to service quality in Islamic banks in Qatar’. International Journal of Commerce and Management, 20(4), 296-307.

Cronin, J., Brady, M., & Hult, G. (2000). ‘Assessing the effect of quality, value, and customer satisfaction on consumer behavioral intentions in service environments’. Journal of Retailing 76 (2), 193-218.

Cronin, J., & Taylor, S. (1992). ‘Measuring service quality: a re-examination and extension’. Journal of Marketing, 56(3), 55-68.

Cronin, J., & Taylor, S. (1994). ‘SERVPERF versus SERVQUAL: reconciling performance-based and perceptions-minus-expectations measurement of service quality’. Journal of Marketing, 58(1), 125-131.

Ebrahimi, M. R., & Moghadam, A. H. (2012). ‘A Survey to Recognize the Most Important Dimensions of the Service Quality of Iran's Commercial Banks’. Journal of Management Research, 4(4), 131-142.

Erol, C., & El-Bdour, R. (1989). ‘Attitudes, behaviour, and patronage factors of bank customers towards Islamic banks’. International Journal of Bank Marketing, 7(6), 31-37.

Erol, C., Kaynak, E., & Radi, E.-B. (1990). ‘Conventional and Islamic banks: patronage behaviour of Jordanian customers’. International Journal of Bank Marketing, 8(4), 25-35.

Estiri, M., Hosseini, F., Yazdani, H., & Nejad, H. J. (2011). ‘Determinants of customer satisfaction in Islamic banking: evidence from Iran’. International Journal of Islamic and Middle Eastern Finance and Management, 4(4), 295-307.

Evans, R.-l. (1979). ‘Bank selection: it all depends on the situation’. Journal of Bank Research, 12, 243-249.

Farrell, M. J. (1957). ‘The measurement of productive efficiency’. Journal of the Royal Statistical Society. Series A (General), 120(3), 253-290.

Galloway, L., & Ho, S. (1996). ‘A model of service quality for training’. Training for Quality, 4(1), 20-26.

Gefen, D. (2002). ‘Reflections on the dimensions of trust and trustworthiness among online consumers’. ACM Sigmis Database, 33(3), 38-53.

Grönroos, C. (1984). ‘A service quality model and its marketing implications’. European Journal of marketing, 18(4), 36-44.

Guo, X., Duff, A., & Hair, M. (2008). ‘Service quality measurement in the Chinese corporate banking market’. International Journal of Bank Marketing, 26(5), 305-327.

Hanif, M. (2010). ‘Differences and Similarities in Islamic and Conventional Banking’. International Journal of Business and Social Sciences, 2(2).

Haron, S., & Azmi, W. N. W. (2008). ‘Determinants of Islamic and conventional deposits in the Malaysian banking system’. Managerial Finance, 34(9), 618-643.

Hassan, T., Mohamad, S., & Bader, M. K. I. (2009). ‘Efficiency of conventional versus Islamic banks: evidence from the Middle East’. International Journal of Islamic and Middle Eastern Finance and Management, 2(1), 46-65.

Hegazy, I. A. (1995). ‘An empirical comparative study between islamic and commercial banks'selection criteria in Egypt’.International Journal of Commerce and Management, 5(3), 46-61.

Hoffman, K. D., & Bateson, J. E. (2002). Fundamentos de marketing de servicios: conceptos, estrategias y casos. Stamford: Thomson.

Hossain, M., & Leo, S. (2009). ‘Customer perception on service quality in retail banking in Middle East: the case of Qatar’. International Journal of Islamic and Middle Eastern Finance and Management, 2(4), 338-350.

Jabnoun, N., & Al-Tamimi, H. A. H. (2003). ‘Measuring perceived service quality at UAE commercial banks’. International Journal of Quality & Reliability Management, 20(4), 458-472.

Jabnoun, N., & Khalifa, A. (2005). ‘A customized measure of service quality in the UAE’. Managing Service Quality, 15(4), 374-388.

Jaffar, M., & Manarvi, I. (2011). ‘Performance comparison of Islamic and Conventional banks in Pakistan’. Global Journal of Management and Business Research, 11(1).

Jamal, A., & Naser, K. (2002). ‘Customer satisfaction and retail banking: an assessment of some of the key antecedents of customer satisfaction in retail banking’. International Journal of Bank Marketing, 20(4), 146-160.

Kang, G.-D., James, J. . (2004). ‘Service quality dimensions: an examination of Gronroos's service quality model’. Managing Service Quality, 14(4), 266-277.

Karatepe, O. M., Yavas, U., & Babakus, E. (2005). ‘Measuring service quality of banks: scale development and validation’. Journal of Retailing and Consumer Services, 12(5), 373-383.

Khan, M. M., & Bhatti, M. I. (2008). ‘Islamic banking and finance: on its way to globalization’. Managerial Finance, 34(10), 708-725.

Kumar, M., Kee, F. T., & Charles, V. (2010). ‘Comparative evaluation of critical factors in delivering service quality of banks: an application of dominance analysis in modified SERVQUAL model’. International Journal of Quality & Reliability Management, 27(3), 351-377.

Lehtinen, U., & Lehtinen, J. R. (1982). Service quality: a study of quality dimensions. New York:Service Management Institute.

Levesque, T., & McDougall, G. H. (1996). ‘Determinants of customer satisfaction in retail banking’. International Journal of Bank Marketing, 14(7), 12-20.

Metawa, S. A., & Almossawi, M. (1998). ‘Banking behavior of Islamic bank customers: perspectives and implications’. International Journal of Bank Marketing, 16(7), 299-313.

Mohd Kassim, N., & Souiden, N. (2007). ‘Customer retention measurement in the UAE banking sector’. Journal of Financial Services Marketing, 11(3), 217-228.

Naser, K., Jamal, A., & Al-Khatib, K. (1999). ‘Islamic banking: a study of customer satisfaction and preferences in Jordan’. International Journal of Bank Marketing, 17(3), 135-151.

Olson, D., & Zoubi, T. A. (2008). ‘Using accounting ratios to distinguish between Islamic and conventional banks in the GCC region’. The International Journal of Accounting, 43(1), 45-65.

Othman, A., & Owen, L. (2001). ‘Adopting and measuring customer service quality (SQ) in Islamic banks: a case study in Kuwait finance house’. International Journal of Islamic Financial Services, 3(1), 1-26.

Parasuraman, A., Berry, L. L., & Zeithaml, V. A. (1991). ‘Perceived service quality as a customer‐based performance measure: An empirical examination of organizational barriers using an extended service quality model’. Human Resource Management, 30(3), 335-364.

Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). ‘A conceptual model of service quality and its implications for future research’. The Journal of Marketing, 41-50.

Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). ‘SERVQUAL: A multiple-item sales for measuring customer perception of service quality’. Journal of Retailing, 64(1), 12-40.

Raven, P., & Welsh, D. H. (2004). ‘An exploratory study of influences on retail service quality: a focus on Kuwait and Lebanon’. Journal of Services Marketing, 18(3), 198-214.

Saleh, A. S., & Zeitun, R. (2006). Islamic Banking Performance in the Middle East: A Case Study of Jordan. Faculty of Commerce-Economics Working Papers, 157.

Shin, D., & Elliott, K. M. (2001). ‘Measuring customers' overall satisfaction: a multi-attributes assessment’. Services Marketing Quarterly, 22(1), 3-19.

Siraj, K., & Sudarsanan, P. (2012). ‘Comparative study on performance of islamic banks and conventional banks in GCC region’. J. Appl. Financ and Banking, 2(3), 123-161.

Sultan, P., & Wong, H. Y. (2010). ‘Performance-based service quality model: an empirical study on Japanese universities’. Quality Assurance in Education, 18(2), 126-143.

Sultan, P., & Wong, H. Y. (2010a). ‘Performance-based service quality model: an empirical study on Japanese universities’. Quality Assurance in Education, 18(2), 126-143.

Sultan, P., & Wong, H. Y. (2013). ‘Antecedents and consequences of service quality in a higher education context: A qualitative research approach’. Quality assurance in education, 21(1), 70-95.

Taap, M. A., Chong, S. C., Kumar, M., & Fong, T. K. (2011). ‘Measuring service quality of conventional and Islamic banks: a comparative analysis’. International Journal of Quality & Reliability Management, 28(8), 822-840.

Toumi, K., Viviani, J.-L., & Belkacem, L. (2011). ‘Actual Risk Sharing Measurement in Islamic Banks’. Critical Studies on Corporate Responsibility, Governance and Sustainability, 2, 325-347.

Tsoukatos, E., & Mastrojianni, E. (2010). ‘Key determinants of service quality in retail banking’. EuroMed Journal of Business, 5(1), 85-100.

Yavas, U. (1988). ‘Banking behaviour in an Arabian Gulf country: a consumer survey’. International Journal of Bank Marketing, 6(5), 40-48.

Young, E. ( (2012)). The World Islamic Banking Competitiveness Report 2011-2012.

Zhou, L. (2004). ‘A dimension-specific analysis of performance-only measurement of service quality and satisfaction in china's retail banking’. The Journal of Services Marketing, 18(6&7), 534-546.

Download full paperFile format: .doc, available for editing
Contact Us