A Comparative Study of Islamic Banking in Pakistan: Proposing and Testing a Model

Abstract

This study examines the relationship between service quality, customer satisfaction and bank performance by conducting a comparative analysis of Islamic banks and conventional banks in Pakistan. Inception of Islamic banking in Pakistan has created multiple challenges for banking industry. Pakistani banking industry consists upon Islamic and conventional banks that are competing for more and more customers by delivery of quality services to have satisfied customers for better performance. On the basis of theoretical background, a model is proposed and tested in Pakistani environment. A structured questionnaire has been developed for the study in the light of the existing literature. Data were collected from 1440 respondents by self-administrated questionnaire by using stratified sampling. A number of tools e.g. SPSS and VPLS etc. are used for data analysis. A set of statistical techniques e.g. T-test, Regression analysis, Correlation and Structural Equation Modeling are applied by the researcher to test the hypotheses of the study. The results indicate a strong positive relationship between service quality and customer satisfaction in the banking sector of Pakistan. Findings shows that service quality and customer satisfaction have weak influence on performance of banks. The study has a number of implications for bankers, policy makers and academicians. Key Words: Islamic Bank, Conventional Bank, Riba, Service Quality, Customer Satisfaction, Bank Performance, Pakistan, Banking Sector.