An examination of the relationship amongst service quality dimensions, customer satisfaction, and loyalty towards Islamic banks in Malaysia

Abstract

Islamic banks now operate in competition with other Islamic banks, foreign Islamic banks and also with conventional banks offering banking products and services based on Islamic principles. However, it is known that the intense competition in the banking industry results in providing better services and competitive products to customers. The aim of this research, hence, is to examine service quality dimensions that contribute to customer satisfaction towards Islamic banks and to explore which dimensions has the most influence on the satisfaction. Besides, this study also examines the relationship between customers satisfaction and loyalty towards Islamic banks. This study utilises the PAKSERV model, a cultural based instrument to measure the service quality in Malaysian Islamic banks. In responding to the aims of this study, a questionnaire survey was distributed in Kuala Lumpur and Selangor areas involving 363 respondents. Data was analysed using PLS-SEM. The result shows that from seven service quality dimensions proposed in this research, only five have positive significant relationships with customer satisfaction. Compliance, the additional dimension, had been found to be the most influential dimension. The second, third and fourth dimension are originated from PAKSERV namely, sincerity, personalization and formality. Meanwhile, the least important dimension is reliability which is originated from the established SERVQUAL developed based on Western context. Other insignificant variables also originated from SERVQUAL, namely tangibility and assurance. Lastly, this study had again proved the relationship between customer satisfaction and loyalty when it shows a positive significant result between the variables. The findings of this study will help the managers of Islamic banks to further enhance the service quality of their organizations.