CUSTOMER SATISFACTION OF ISLAMIC BANKING SERVICES IN MALAYSIA

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1 CUSTOMER SATISFACTION OF ISLAMIC BANKING SERVICES IN MALAYSIA MUHAMMADZULFARIS MOHD SALLEH AZWAN ABDULLAH NOORSHELLACHENAWI Universiti Malaysia Kelantan, Malaysia ABSTRACT Nowadays, the Islamic banking industry in Malaysia is growing rapidly and facing fierce competition especially from conventional banks. Hence, the Islamic banking s players should play better roles in order to compete and have the competitive advantages among the others. The main objective of this research is to find the impact of product quality on customer satisfaction in the Islamic banking industry. The result showed that there is a significant relationship between product quality and customer satisfaction in the industry. Thus, from this result, the Islamic banking s players can improve their products based on what the customers really need and want. Keywords: satisfaction, customers, Islamic banks INTRODUCTION The main purpose for the emergence of Islamic Banks is to fulfil the needs and demands of the Muslim customers (Khattak&Rehman, 2010). Actually, this is similar to the conventional banks if the existence of the Islamic banks is merely to fulfill the customer needs, but what makes it different is the Shariah compliance in which it must adhere to the rules and regulations of Islam (Nashwa & Mona, 2016). In order to be successful organizations, the industries players especially bankers must seriously take on the customer satisfaction. The customers will promote the organisations themselves if they are very satisfied with the good performance that are showed by the organizations. In the end, it will lead to the sustainability of the organizations and they will become more competitive globally compared to competitors. Haqueet al. (2009) claims, the growth of the Islamic banks has become a new phenomenon in the Islamic economic industry worldwide. As a result, there are strong competitions that Islamic banks must face either with conventional banks or among the Islamic banks especially when the competitors offer the same products that already exist in the market. According to Naseret al. (1999), the new generation of the customers are more educated and very up to date with the current issues and information. Therefore, banks should look after the satisfaction of their customers and find out whether the products delivered fulfil the customers needs or not. Besides that, banks must also enhance their products continuously so that they will always be on demand by the customers. PROBLEM STATEMENT The emergence of the Islamic banking sector has changed the banking landscape in Malaysia from the unproductive industry to the competitive one. Consequently, it enhances the customers awareness and knowledge and they have started to demand for the quality (Abdullah, Sidek, & Adnan, 2012). This has led the customers regardless whether they are Muslims or not to have a lot of options for better products and services either in Islamic banks or conventional banks. Definitely, they will choose the products that meet their need the best. (Parvez, 2014) icmrrjournal@gmail.com

2 There are some customers who claim that the Islamic products are quite more expensive than conventional products offered (Loubna Flah, 2012). According to Raza et al., (2011), the reason why Islamic banks is claimed to be more expensive on the their product offerings is because they fix the profit percentage while the conventional banks float the profit based on the based lending rate (BLR). In order to apply for the products, procedures implemented in conventional banks are more straight forward compared to Islamic banks which require applicants to adhere to a lot of rules and regulations. This situation will lead to the increase of cost as there are certain requirements that the customers need to fulfil during the applications(igonina& Postaliuk, 2014). According to Abduh & Alias (2014), the Islamic Banks in Malaysia implemented similar procedures and concepts as the conventional banks. The correct concept that should be applied by the Islamic Banks is the profit and loss sharing such as Musharakah and Mudarabah and not on fixed return basis that is implemented by conventional banks (Raza, Shah, & Khurshid, 2011). Moreover, there are some people who still misunderstand the concept implemented by the Islamic Banks when they claim Islamic banks impose a higher interest or higher margin profit on customers compared to the conventional banks (Abdul Aris et al., 2013).As a result, for a better solution, Islamic banks must be proactive in approaching the customers and educate them. Besides that, the bankers also must equip themselves with a lot of knowledge and really understand the issues that will be addressed (Wan Mohamad, 2010). RESEARCH QUESTION a. What are the impacts of quality products on customer satisfaction in the Islamic banking? RESEARCH OBJECTIVE a. To investigate the impacts of quality products on customer satisfaction in the Islamic banking. LITERATURE REVIEW According to Verma (2012), customer satisfaction can be defined as the feedback from the customers after using or purchasing the products based on the costs that they spend or reward that they get.drengner et al. (2012 ) claims that the satisfaction of the customer is related and dependent on the emotional actions. The customer will react on what they feel on the products or services that they expect.according to Sabei (2014 ), the quality can be defined as a measuring standard of the performance that fulfil the needs and desires of the customers and at the same time the offering can be improved over time. Based on Khattak&Rehman (2010), the main source for industry to sustain competitivenes in the market is customer satisfaction. It is very essential to bankers in order to retain the customers, attract new ones, and stay competitive in the market.the customer satisfaction concept is already an established concept and proven one by organisations and that is why this concept is implemented in many areas like marketing, consumer research, economic psychology, and welfare and general economics. For the Islamic banking sector, this concept can be considered as the key of the successful performance (Siddiqi, 2011). The customer satisfaction can be measured by looking at the total experience of the customers that have conducted business with the company. In addition, the customers can express their feeling on the services that they have already experienced whether they are satisfied or not (Farris, Bendle, Pfeifer, &Reibstein, 2010). According to Ahmad et al. (2011), the bankers should innovate products and change them into new dimensions that can attract customers who come from 21 icmrrjournal@gmail.com

3 different backgrounds and societies and at the same time can market the products to fulfill the customers needs and wants. According to Muhamatet al. (2011) whose research focused on Malaysia, he claims, most of the banks customers quite agreed that using the Arabic terminology will contribute to the competitive advantages of Islamic banks, but the most significant thing that was expressed by the customers is the quality products should be delivered or marketed. Besides that, in order to improve the productivity and performance, the acceptance and satisfaction by customers are very vital. Finally, the quality of services and products provided by banks will affect the satisfaction and loyalty of their customers and influence the performance of the banks (Bashir, Machali&Mwinyi, 2012). According to Sameena (2014) in order to enhance the customer satisfaction and increase the performance, Islamic Banks should deliver effective marketing and educate the customers to improve their understanding of Islamic banks products and services and reduce their misconceptions of the banks. RESEARCH HYPOTHESES The hypothesis is as follow: H1. Product quality significantly affects the customer satisfaction of the Islamic banking. RESEARCH FRAMEWORK The purpose of this paper is to investigate the influence of product quality on customer satisfaction. The independent variable is the quality of the product while the dependant variable is customer satisfactions PRODUCT QUALITY CUSTOMER SATISFACTIONS METHODOLOGY Figure 1: Research Framework The data was collected in Kota Bharu, Kelantan. The target population focused on the customers of Islamic banks in Kelantan. Respondents were selected by convenience sample, where the questionnaires were distributed during the visits of the customers to the banks. In total, there are 30 questionnaires distributed. The data gathered was analysed by using the Statistical Package for Social Science (SPSS) Version DATA COLLECTION METHODS For the primary data, this study used a survey approach and distributed the questionnaires to the respondents. The respondents were asked to answer the questionnaires based on a three-point Likert-type scale, ranging from 1= strongly disagree, 2= disagree, 3= neutral, 4= agree, and 5= strongly agree.in order to support the primary data, the secondary data was referred. The example of secondary data that was referred in this research include newspapers, journals, internet, and books icmrrjournal@gmail.com

4 FINDINGS INTERCONTINENTAL JOURNAL OF MARKETING RESEARCH REVIEW Reliability Analysis The function of Cronbach s Alpha statistic is to estimate the reliability of the data. The value can be measured between 0 and 1 by using Cronbach s Alpha. The closer the value is to 1, the more reliable the value got. According to Ulfat (2013), the value of Cronbach s alpha that showed between and can be considered good while the value below 0.60 cut off point, has no reliability in the coefficients. In this research, Alpha = 0.914, so the scale is reliable. Hypothesis Testing Test of Hypothesis 1 H1. Product quality significantly affects the customer satisfaction of the Islamic banking. The table below shows that the variables explain 67% of the variance (R square) of positive relationship. The impact of product quality on customer satisfaction is positive and significant. Thus, the results provide strong support for Hypothesis 1. CONCLUSION AND RECOMMENDATIONS The main objective of this study is to investigate the impact of product quality on the customer satisfaction of the Islamic Banking in Malaysia. In order to measure the level of satisfaction among the customers, the questionnaires were distributed among the banks customers. The data gathered was analysed by using SPSS. In conclusion, the result has showed that there is a significant relationship between product qualities on customer satisfaction in which better quality products will lead to a higher customer satisfaction. Hence, the Islamic Banks should attract the customers by launching the varieties of products that are different to the other competitors. Besides that, the bankers should their play roles by delivering information and knowledge to the customers in order to enhance their understanding and awareness towards the Islamic banking s products and services offered. Furthermore, reputation can also be a determinant by customers in choosing banks. The tendency of the customers in choosing the banks that have good reputation and image is high since a good reputation usually means the delivery of the good services icmrrjournal@gmail.com

5 LIMITATIONS AND FUTURE RESEARCH The present research just represents a small sample size of the respondents and data. For a further research, the questionnaires and surveys should be distributed on a big sample in order to get more accurate results. Furthermore, in the further research, the researchers should consider other determinants that can affect the customer satisfaction such as services, awareness, and technology. Similarly, the similar research also should be conducted on conventional banks in order to measure the customer satisfaction of those banks. REFERENCES Ahmad, A.; Humayoun, A. A.; Nawaz, M.M. and M. Bashir (2011). How customer satisfaction affects performance of Islamic banks in Pakistan, Interdisciplinary Journal of Contemporary Research in Business, 2 (9), pp Bashir, M. S., Machali, M. M., &Mwinyi, A. M. (2012). The effect of service quality and government role on customer satisfaction: Empirical evidence of microfinance in Kenya. International Journal of Business and Social Science, 3(14), Farris, P.W., Bendle, N.T., Pfeifer, P.E,.&Reibstein, D.J. (2010). Marketing metrics: The definitive guide to measuring marketing performance. Upper Saddle River, New Jersey: Pearson Education, Inc Lee Shi Hao,NgoKah How &Shavitra(2013) Adoption On Islamic Banks : A Study On Malaysia University Students. UniversitiTunku Abdul Rahman Muhamat, A.A; Jaafar, M. H., and Ali Azizan, N. binti (2011). An empirical study on banks' clients' sensitivity towards the adoption of Arabic terminology amongst Islamic banks, International Journal of Islamic and Middle Eastern Finance and Management, 4(4), pp Nik Rahim, ArifFahmi, Basirah(2015) Islamic Banking: The Malaysian Experiences and Challenges.International Congress on Islamic Economics and Finance ICISEF 2015 Sakarya, Turkey Siddiqi, K.O. (2011). Interrelations between service quality attributes, customer satisfaction and customer loyalty in the retail banking sector in Bangladesh. International Journal of Business and Management, 6(3), Verma, H. (2012). Services Marketing: Text and Cases ( 2nd ed.). India: Person Education. ZukriSamat(2013)Islamic Banking In Malaysia : Currrent Trend and Way Forward. Bank Islam Malaysia ZukriSamat(2013)Islamic Banking: the Lessons and Challenges in Malaysia & Beyond. Bank Islam Malaysia Allied Islamic Banking (2015) What is Islamic Banking? Retrieved from islamic-banking/faqs/ 24 icmrrjournal@gmail.com

6 Islamicbanker.com (2015) Women in Leadership - Interview with SaminaAkram, Retrieved fromhttps:// Ernst & Young (2013) Global Islamic assets expected to reach US$1.8 trillion by Retrieved from Islamic-assets-expected-to-reach-US-1-8-trillion-by-2013 Malaysia International Islamic Financial Centre (2016)The Evolution of Islamic Finance in Malaysia Retrieved from index.php?ch=ch_header_ contact_us&pg=pg_header_aboutus 25 icmrrjournal@gmail.com