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[ 299 ]

International J ournal of
Bank Marketing
16/ 7 [1998] 299313
MCB University Press
[I SSN 0265-2323]
Banki ng behavi or of Isl ami c bank cust omers:
perspect i ves and i mpl i cat i ons
Saad A. Met awa
Associate Professor of Finance, College of Business Administration,
University of Bahrain, Bahrain
Mohammed Al mossawi
Assistant Professor of Marketing, College of Business Administration,
University of Bahrain, Bahrain
Describes a study designed to
investigate the banking behav-
ior of Islamic bank customers
in the state of Bahrain. The
study sample comprised 300
customers. A comprehensive
prole analysis and a series of
chi-square tests were con-
ducted to reveal key charac-
teristics and patterns: the
majority of Islamic bank
customers are well educated;
approximately 80 per cent are
between 25-50 years of age;
more than 50 per cent of the
surveyed customers have
maintained their current
banking relationship with
Islamic banks for more than
six years; customers aware-
ness and usage rates are quite
high for savings accounts,
current accounts, investment
accounts and automated teller
machines; customers were
found to be most satised with
the products/services they use
most, with the investment
accounts receiving the highest
satisfaction score; Islamic
bank employees received the
highest satisfaction score
among the elements of the
service delivery system; the
two most important bank
selection criteria were adher-
ence to the Islamic principles,
followed by the rate of return.
1. Int roduct i on
The last two decades have wi tnessed the
emergence of I slami c banki ng as a vi able
banki ng system. Si nce 1971, I slami c banks
have conti nued to grow i n si ze and i n num-
bers. The mai n mi ssi on of these banks has
been the achi evement of soci al and economi c
development through the delivery of nanci al
servi ces i n li ne wi th the pri nci ples and teach-
i ngs of I slam. To achi eve thei r mi ssi on, i t i s
i mperative for I slami c banks to conti nue to
study the changi ng behavi or, atti tude and
percepti ons of thei r customers especi ally i n
the retai l sector whi ch consti tutes the major
porti on of the banki ng busi ness.
Thi s study i s desi gned to i denti fy the prole
and banki ng habi ts of I slami c bank
customers as well as thei r awareness, usage,
perceived i mportance and degree of sati sfac-
ti on wi th the current products and servi ces
provi ded by two leadi ng I slami c banks oper-
ati ng i n Bahrai n. Those two banks are the
Bahrai n I slami c Bank and the Fai sal I slami c
Bank. These two banks are the only I slami c
commerci al banks i n Bahrai n. They are the
mai n provi ders of I slami c nanci al servi ces
to the resi dents of Bahrai n. The combi ned
total assets of these two banks was BD160
mi lli on ($423 mi lli on) i n 1996 whi ch i s approx-
i mately si x per cent of the total assets of all
commerci al banks i n Bahrai n. Further more,
the total deposi ts of these two banks, for the
same peri od, was BD141 mi lli on ($373 mi lli on)
whi ch represents about ve per cent of the
total deposi ts of the 19 commerci al banks i n
Bahrai n (Bahrai n Monetary Agency, 1997).
These gures i ndi cate that these two leadi ng
I slami c banks have a si gni cant share of the
total retai l market i n Bahrai n.
The study uti li zes a questi onnai re method-
ology desi gned to survey 300 customers that
fai rly represent the customers of the two
banks. A number of stati sti cal tests along
wi th a prole analysi s are perfor med to eval-
uate the empi ri cal ndi ngs emergi ng from
thi s comprehensive survey.
Thi s study i s divi ded i nto ve secti ons.
Secti on one i s an i ntroducti on to the study.
Secti on two presents a detai led revi ew of the
relevant li terature. Secti on three embraces
the study methodology whi ch i ncludes a
detai led descri pti on of the questi onnai re, the
sample, the procedure of data collecti on and
an overvi ew of the stati sti cal tests used i n the
study. Secti on four presents the study nd-
i ngs. I t begi ns wi th a prole analysi s
desi gned to i denti fy the banki ng behavi or of
the I slami c bank customers as well as a
detai led di scussi on of the results of the stati s-
ti cal tests perfor med. Secti on ve presents
the mai n conclusi ons of the study. Thi s sec-
ti on also i ncludes a li st of recommendati ons
for i mprovi ng the quali ty of products/ ser-
vi ces provi ded by I slami c banks.
2. Li t erat ure revi ew
2.1. Cust omer sat i sfact i on
Customer sati sfacti on i s the feeli ng or atti -
tude of a consumer toward a product/ servi ce
after i t has been used (Solomon, 1996; Wells
and Prensky, 1996). A sati sed consumer wi ll
repeat the purchase of the product and con-
vey posi tive messages about i t to others (Di s-
pensa, 1997). By contrast, a di ssati sed con-
sumer i s more li kely to swi tch to an alter na-
tive product/ servi ce the next ti me he/ she
recogni zes the same need. Not only thi s, but
also hi s/ her di ssati sfacti on wi ll be reected
i n a negative word of mouth whi ch mi ght
have a seri ous damagi ng effect on the busi -
ness. Therefore, i t i s cruci al that r ms ensure
customer sati sfacti on for thei r products/ ser-
vi ces. Thi s has led to the i ncreasi ng popular-
i ty of measuri ng customer sati sfacti on i n
recent years (Gulledge, 1996).
Banking is one of those industries in which
consumer satisfaction has attracted the atten-
tion of many researchers (for example,
Anderson et al., 1993; Bedall and Power, 1995;
Brenhardt et al., 1994; Dispensa, 1997; Holliday,
1996; Wells and Prensky, 1996; White, 1994). One
[ 300 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7[1998] 299313
of the major reasons i s that a ercer level of
competi ti on i s becomi ng the most i nuenti al
factor i n deter mi ni ng the competi tiveness of
banks (Bartell, 1993; Haron et al., 1994).
Customer sati sfacti on i s becomi ng so
i mportant to the extent that some banks con-
si der i t as a chi ef element i n thei r marketi ng
strategi es. The ter m "after marketi ng" has
been wi dely used to mean focusi ng attenti on
and efforts on current customers i n order to
maxi mi ze thei r sati sfacti on so to secure thei r
retenti on (Vavra, 1995).
The i ssue of customer retenti on has been
the major concer n of many banks. For exam-
ple, Lloyds Bank (UK) conducted research to
i denti fy the process leadi ng from customer
sati sfacti on to account closure and to explore
the deter mi nant factors of di ssati sfacti on.
The ndi ngs of the study helped Lloyds to
desi gn and i mplement a new customer reten-
ti on process (Waterhouse and Morgan, 1994).
Li ke Lloyds Bank, the Nati onal Bank of Mi d-
dlebury (USA) also developed a quali ty ser-
vi ce program based on customer retenti on
through servi ce quali ty. Si mi larly, the Royal
Bank of Scotland uses customer sati sfacti on
to help plot the course toward i ts vi si on for
the future. The bank i s concer ned about prof-
i table customer behavi or i n ter ms of the 3
Rs: remai ni ng wi th the bank, referri ng the
bank to fri ends, and repurchasi ng from the
bank (I J RDM, 1995b).
To sati sfy customers, banks use vari ous
tools, rangi ng from reengi neeri ng all servi ces
to focusi ng on some speci c servi ces (Motley,
1994). One of the areas whi ch i s growi ng and
beli eved to have a si gni cant i mpact on cus-
tomer sati sfacti on i s telemarketi ng (Si on,
1994). Whi te (1994) has exami ned the i mpor-
tance of telemarketi ng i n sati sfyi ng
customers and concluded that telephone
banki ng could become a key aspect of cus-
tomer sati sfacti on. I n Si ngapore banks are
conti nually i nvolved i n i mprovi ng the core
technology that makes self-servi ce banki ng
products possi ble i n order to achi eve better
marketi ng, customer sati sfacti on and reten-
ti on (Kass, 1992). The Co-operative Bank i n
the UK has appli ed another strategy to sati sfy
i ts customers. The bank encouraged
customers to communi cate di rectly wi th i ts
account management center, rather than
contacti ng the branches, for any problem or
complai nt they mi ght have. Thi s strategy has
helped Co-op to gai n one of the hi ghest cus-
tomer sati sfacti on rati ngs (I J RDM, 1995a).
The above di scussi on hi ghli ghts the i mpor-
tance of customer sati sfacti on whi ch i s
thought to be the cor nerstone i n constructi ng
strategi es of banks. I n thi s respect, i t i s essen-
ti al for a present-day bank to swi tch from
managi ng means to managi ng customers i n
order to sati sfy them wi th the whole servi ces
they offer. Therefore, it is important for banks
to have a system by which consumer satisfac-
tion is continuously measured (Chakravarty et
al., 1996; Chitwood, 1996; Morrall, 1996; Noe,
1996; Romano and Sanllipo, 1996).
2.2. Inuence of qual i t y
I n the long run, the most i mportant si ngle
factor affecti ng a busi ness uni ts perfor-
mance i s the quali ty of i ts products and
servi ces, relative to those of competi tors
...Superi or and i mprovi ng quali ty i s the
most effective way for a busi ness to grow.
Quali ty leads to both market expansi on and
gai ns i n market share (Buzzel and Gale,
1987).
I n a servi ce busi ness, quali ty depends on the
customers experi ence wi th delivery because,
unli ke products, servi ces are experi enced
whi le they are produced. Studi es from the
servi ce li terature emphasi ze the i mportance
of quali ty percepti ons and the relati onshi p
between servi ce sati sfacti on and quali ty (e.g.
Croni n and Taylor, 1992; Taylor et al., 1994).
There i s evi dence to suggest that servi ce
quali ty leads to customer sati sfacti on and
helps to keep exi sti ng customers and attract
new ones (Kei ser, 1993; Li an, 1994a, b). How-
ever, some banks go even beyond servi ce
quali ty. They suggest what they call servi ce
excellence (Mahoney, 1994). Masden (1993)
denes servi ce excellence as a eld through
whi ch r ms can deli ght thei r customers and
exceed thei r expectati ons: servi ce excellence
concentrates on li steni ng, empower ment,
i nnovati on, and maki ng customers and
employees part of the acti on (Masden, 1993).
The reali zati on of the i mportance of quali ty
sti mulated many manufacturi ng and servi ce
busi nesses to adopt programs such as TQM
(total quali ty management) or CQI (conti nu-
ous quali ty i mprovement) (J ames, 1989;
J oseph, 1996).
2.3. Inuence of i nt ernal market i ng (i .e.
empl oyees) on servi ce qual i t y
I nter nal marketi ng has been dened as mar-
keti ng the r m to i ts employees (Gronroos,
1982); i n other words, attempti ng to motivate
and sati sfy employees through trai ni ng,
i ncentives, appreci ati on, and parti ci pati on,
etc. (J oseph, 1996; Kotler and Ar mstrong,
1991). The i mportant role of bank employees
i n the quali ty of the servi ces delivered i s well
documented i n the li terature (Bartell, 1993;
Berry and Parasuraman, 1991; Bi tner, 1990;
Chi twood, 1996; Gronroos, 1982; J oseph, 1996;
Kotler and Ar mstrong, 1991; Surprenant and
Solomon, 1987). I nter nal marketi ng i s i mpor-
tant because the people who deliver servi ces
play speci al roles i n sati sfyi ng customers,
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Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7 [1998] 299313
(J oseph, 1996). Several studi es of servi ce
sati sfacti on have found that the i nteracti on
between customer and employee plays an
i mportant role i n sati sfyi ng customers (e.g.
Bi tner, 1990; Surprenant and Solomon, 1987).
Thi s concept has also been appli ed to the
banki ng i ndustry. Several banks have real-
i zed that outsi de customer sati sfacti on must
start from i nsi de (i .e. employees) sati sfacti on.
For example, Ci ti zens Commerci al Savi ng
Bank of Fli nt, Mi chi gan (USA), appli ed a
strategy to make sure that the staff member
responsi ble for a customer contact had the
necessary tools and deci si on-maki ng powers
to properly servi ce the customer duri ng the
servi ce contact (Stone, 1995). The i nter nal
sati sfacti on as a gateway to the exter nal one
has been emphasi zed by Gremler and others
i n thei r study of a large US bank (Gremler et
al., 1995). All these studi es i ndi cate the i mpor-
tance of i ncreasi ng employees ski lls through
conti nuous trai ni ng. Trai ned employees can
posi tively contri bute to the servi ce quali ty
whi ch was found by many banks to be i nstru-
mental to customer sati sfacti on and retenti on
(Li an, 1994a, b).
2.4. Bank sel ect i on cri t eri a
Bank selecti on cri teri a have been heavi ly
i nvesti gated over the past two decades
(Anderson et al., 1976; Evans, 1979; Haron et
al., 1994; Hegazy, 1995; Kaynak and Yavas,
1985; Khazeh and Decker, 1992; Laroche et al.,
1986; Ross, 1989). I n most of these studi es,
questi onnai re methodology was employed to
evaluate the relative i mportance of speci c
selecti on attri butes. Several attri butes were
found to play a cruci al role i n the process of
bank selecti on. Those attri butes i nclude:
avai labi li ty of credi t, relatives advi ce and
recommendati ons, fri ends advi ce and recom-
mendati on, conveni ent locati on, vari ety of
bank servi ces, the quali ty of servi ces, avai l-
abi li ty of ATM, adequate bank hours, retur n
on i nvestment, fri endli ness of personnel,
understandi ng nanci al needs, speci al ser-
vi ces for women, and bank name. The relative
i mportance of each of those attri butes di ffers
from one market to another dependi ng on: the
type of i nsti tuti on (I slami c bank or commer-
ci al bank), the customers level of educati on,
age, i ncome and occupati on.
Given the speci al nature of I slami c banki ng
whi ch di fferenti ates i t from commerci al
banki ng, i t i s expected that some of the above
selecti on attri butes that have been found to
be cruci al i n the selecti on of commerci al
banki ng, may not play the same role i n the
selecti on of I slami c banks. Hegazy (1995) has
i nvesti gated bank selecti on cri teri a for both
I slami c banks and commerci al banks. He
concluded that the selecti on attri butes for
I slami c banks are di fferent from those for
commerci al banks. For the selecti on of
I slami c banks, i t was found that the most
i mportant factor was the advi ce and recom-
mendati ons made by relatives and fri ends.
Conveni ence of locati on, fri endli ness of per-
sonnel, the banks vi si on of servi ng the com-
muni ty regardless of the expected protabi l-
i ty, ti meli ness, and effi ci ency were also found
to play i mportant roles i n the selecti on of
I slami c banks.
I denti fyi ng the mai n selecti on attri butes
wi ll allow I slami c banks to develop appropri -
ate marketi ng strategi es. Si nce I slami c banks
operate accordi ng to prot-loss shari ng pri n-
ci ples (prohi bi ti on of i nterest), they are
expected to develop thi s competi tive advan-
tage around those cruci al selecti on attri butes
emergi ng from comprehensive customer
surveys.
3. The met hodol ogy
The methodology employed i n thi s study
i nclude: the procedure for data collecti on, the
study sample, the procedure and techni ques
used i n the data analysi s, and the study li mi -
tati ons. A bri ef descri pti on of each of these
elements i s presented i n thi s secti on.
3.1. Dat a col l ect i on
The data requi red for conducti ng thi s study
were collected usi ng self-admi ni stered ques-
ti onnai res, speci ally desi gned to achi eve the
study goals as outli ned i n secti on one. A total
of 14 questi ons coveri ng 14 key attri butes of
the customers banki ng behavi or were pre-
pared after revi ewi ng the relevant li terature
on the subject, as well as consulti ng key offi -
ci als i n the two selected banks. Thi rteen of
the 14 questi ons were closed-ended questi ons
to encourage easy response from the cus-
tomers and to allow the researchers to use
stati sti cal tests i n evaluati ng the empi ri cal
ndi ngs of the study.
A pi lot study of 15 questi onnai res (about
ve per cent of the total sample si ze) was
conducted to check the vali di ty and logi c of
the questi ons i ncluded i n the questi onnai re.
After revi ewi ng the feedback from the pi lot
study, several key amendments were made
before the di stri buti on of the questi onnai re.
The questi onnai res were hand di stri buted
to the account holders i n the two selected
banks. As the two banks have branches, the
questi onnai res were di stri buted i n all the
branches to seek wi der representati on of
bank customers. Thi s process of data collec-
ti on conti nued for three months, from Decem-
ber 1996 through February 1997. Respondents
were selected from among customers vi si ti ng
[ 302 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7[1998] 299313
the sampli ng locati ons duri ng the chosen
ti me i ntervals, i n order to eli mi nate the sam-
pli ng frame errors and to ensure the repre-
sentati on of the populati on under study i n the
sample uni ts.
The questi onnai res were di stri buted
duri ng vari ous worki ng hours of the same
day (mor ni ngs and eveni ngs), as well as vari -
ous days of the week and the month, to avoi d
any potenti al bi as owi ng to hi gh concentra-
ti on of bank customers duri ng certai n hours
of the day, or certai n days of the week or
month. Further more, a number of questi on-
nai res were di stri buted by the women sec-
ti ons of the two banks, to ensure full repre-
sentati on of the enti re populati on of I slami c
bank customers. Fi nally, non-response bi as
was i nvesti gated and no si gni cant bi as was
detected.
Although 400 questi onnai res were di stri b-
uted, the actual sample si ze (i .e. usable
retur ned and completed questi onnai res) was
300 customers (160 from the Fai sal I slami c
Bank and 140 from the Bahrai n I slami c
Bank). Those usable questi onnai res were
ei ther retur ned to the bank offi ci al desi g-
nated to collect them, or to the researchers
mai l address.
3.2. The procedure of dat a anal ysi s
Two types of analysi s were conducted i n thi s
study: prole analysi s and stati sti cal analy-
si s.
Prole analysi s can be vi ewed as a means of
classi fyi ng a parti cular set of subjects accord-
i ng to a parti cular number of relevant attri b-
utes. Thi s method i s wi dely used i n soci al
sci ence research especi ally those studi es that
i nvolve the i nvesti gati on of behavi oral i ssues.
Thi s method of analysi s has been used i n
many studi es as a rst step before conducti ng
any stati sti cal analysi s.
The prole analysi s employed i n thi s study
was conducted vi a the use of percentages,
mean scores and ranks. The results of the
analysi s are presented i n Tables I -VI I i n sec-
ti on 4 of thi s paper.
I n addi ti on to the prole analysi s, a non-
parametri c stati sti cal test was also employed
i n thi s study. The selected chi -square test
whi ch has been wi dely used i n the li terature
was adopted i n thi s study for two reasons:
rst, i ts sui tabi li ty to the nature of the data
collected, as most of the data are nomi nal
type; second, the appli cati on of the techni que
does not requi re those restri ctive assump-
ti ons that are nor mally associ ated wi th most
parametri c stati sti cal tests.
3.3. St udy l i mi t at i ons
There are two mai n li mi tati ons to thi s
research. Fi rst, there were only two I slami c
banks whose customers parti ci pated i n thi s
study Bahrai n I slami c Bank and Fai sal
I slami c Bank . As a result, the generali zabi l-
i ty of the ndi ngs of thi s research should be
consi dered carefully. The second li mi tati on
concer ns the nature of the measures used.
The measures i ncluded i n thi s research were
all based upon the percepti ons of the parti ci -
pati ng customers. Therefore, the potenti al for
data i naccuraci es due to i tem mi si nterpreta-
ti on or predi sposi ti on to certai n responses on
the part of the parti ci pant does exi st.
4. Fi ndi ngs
I slami c banks currently face vari ous types of
competi tive pressures from both the tradi -
ti onal commerci al banks and other I slami c
banks and I slami c i nvestment compani es.
The scope of thi s competi ti on has grown i n
recent years to i nclude every market, product
or servi ce. I n thi s hi ghly competi tive envi ron-
ment, I slami c banks need to for mulate and
i mplement successful marketi ng plans i n
whi ch a key i ngredi ent i s a clear understand-
i ng of the behavi or, atti tudes and percepti ons
of thei r customers. Thi s mi ssi on can best be
achi eved through i denti fyi ng a complete
prole of I slami c bank customers whi ch
i ncludes: thei r banki ng habi ts, thei r selecti on
cri teri a, thei r awareness and usage of the
vari ous I slami c bank products/ servi ces,
thei r degree of sati sfacti on wi th those prod-
ucts/ servi ces and thei r delivery systems.
4.1. Cust omer prol e
The success of I slami c banks i n for mulati ng
effective marketi ng plans largely depends on
mai ntai ni ng an up-to-date complete prole
i nfor mati on on thei r customers. Thi s
i ncludes customer age, i ncome, educati onal
level, nati onali ty, and other socio-demographic
i nfor mati on. The avai labi li ty of such a com-
prehensive prole provi des the bank manage-
ment wi th a soli d basi s for maki ng plausi ble
and effective deci si ons regardi ng the market-
i ng of thei r products and servi ces.
Table I presents a comprehensive prole of
the I slami c bank customers parti ci pati ng i n
thi s study.
The results reported i n Table I show that
the majori ty of I slami c bank customers are
well educated, wi th more than 40 per cent
holdi ng hi gh school di ploma and about 50 per
cent holdi ng a bachelor degree or above.
These ndi ngs i ndi cate that I slami c banki ng
i n Bahrai n i s predomi nantly the habi t of well-
educated persons. Those ndi ngs provi de
I slami c bank managers wi th valuable i nputs
for for mulati ng thei r marketi ng strategy.
More sophi sti cated products/ servi ces can be
[ 303 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7 [1998] 299313
offered as they can be easi ly handled by those
well-educated customers. However, the
emphasi s on the products/ servi ces to the
well-educated customers should not lead
I slami c bank management to underesti mate
the need to develop certai n types of
products/ servi ces that can attract less-edu-
cated customers i n thei r efforts to expand
thei r customer base.
I n addi ti on, the results reported i n Table I
show that approxi mately 42 per cent of
I slami c bank customers ear n less than BD400
per month. Those customers typi cally repre-
sent a si zeable porti on of populati on i n
Bahrai n. As a result, management personnel
i n I slami c banks need to provi de the range of
products and servi ces that sui t the needs of
the customers i n these i ncome groups. A
detai led study of the spendi ng behavi or of the
customers i n thi s group can provi de I slami c
banks wi th hi ghly useful i nfor mati on that
can be used i n the development of the appro-
pri ate products/ servi ces to those customers.
The results also show that about 25 per cent
of the surveyed customers ear n between
BD400-BD600 per month and 15.9 per cent of
them ear n between BD600-BD800 per month.
Combi ned together, the customers i n those
two i ncome groups represent approxi mately
40 per cent of the total sample. Accordi ng to
the i ncome di stri buti on chart i n Bahrai n,
those customers appear to ear n a relatively
hi gh monthly i ncome. These ndi ngs can
provi de valuable i nfor mati on for launchi ng
appropri ate savi ng schemes that sui t the
demographi cs of customers i n these rela-
tively hi gh-i ncome groups.
Further more, the results presented i n
Table I show that nearly 80 per cent of I slami c
bank customers fall i n the range 25-50 years
of age. Thi s percentage appears to be i n li ne
wi th the ndi ngs of previ ous banki ng studi es
(Rondall, 1993). I nvesti gati ng the spendi ng
behavi or and the nanci al needs of the cus-
tomers i n thi s age group i s li kely to have far-
reachi ng i nuence on the I slami c banks
nanci ng schemes, such as nanci ng cus-
tomers acqui si ti on of cars, houses, and other
durable goods, as well as savi ng schemes such
as student educati on fund, medi cal fund, etc.
Fi nally, the results i n Table I i ndi cate that
approxi mately 89 per cent of I slami c bank
customers are Bahrai ni nati onals, whi le only
11 per cent are non-Bahrai ni . Thi s i ndi cates
that there i s a relatively hi gh degree of stabi l-
i ty i n the I slami c banks customer base whi ch
allows the management of those banks to
desi gn and i mplement longer-ter m nanci ng
and savi ng schemes.
4.1.1. History of banking relationships
Table I I presents a hi stori cal perspective on
the banki ng relati onshi ps for the surveyed
customers.
The data i n panel A of Table I I , show that 76
per cent of the surveyed customers have had a
previ ous banki ng relati onshi p wi th tradi -
ti onal banks pri or to thei r current relati on-
shi p wi th thei r selected I slami c bank.
Although those customers mi ght be aware of
the di fferent phi losophi es of the two banki ng
systems (i .e. tradi ti onal banki ng system and
I slami c banki ng system), i t i s expected that
thei r previ ous banki ng experi ences are li kely
to i nuence thei r atti tudes and percepti ons
and degree of sati sfacti on wi th the current
products/ servi ces offered by I slami c banks.
The results in Table II also show that 54 per
cent of the surveyed customers have main-
tained a banking relationship with Islamic
banks for more than six years and 18.5 per cent
Tabl e I
Prole of Islamic bank customers
Vari abl e Per cent
Age
Less t han 25 years 13.7
25-35 46.7
36-50 31.9
More t han 50 5.6
Educat i on
Bel ow hi gh school 4.8
Hi gh school 40.4
Col l ege/ Bachel or 38.1
Above Col l ege/ Bachel or (Mast er or PhD) 14.8
Income*
Less t han BD200 11.1
BD200-BD400 30.7
BD401-BD600 24.8
BD601-BD800 15.9
BD801-BD1000 6.3
More t han BD1000 10.7
Nat i onal i t y
Bahrai ni 88.1
Non-Bahrai ni 11.9
Not e: * Exchange rate BD1 =$2.6
Tabl e II
History of banking relationships
Panel At t ri but e Per cent
A Previ ous banki ng rel at i onshi p
wi t h t radi t i onal banks
Yes 76
No 24
B Durat i on of banki ng rel at i onshi p
wi t h Isl ami c banks
Less t han 2 years 13.7
2 t o l ess t han 4 years 13.3
4 t o l ess t han 6 years 18.5
6 years and more 54.1
[ 304 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7[1998] 299313
of them have mai ntai ned such a relati onshi p
for a peri od between four to si x years. These
results show that there i s a relatively hi gh
degree of stabi li ty of those customers rela-
ti onshi ps wi th I slami c banks. Thi s suggests
that thei r atti tudes, behavi or and degree of
sati sfacti on wi th I slami c bank servi ces wi ll
be of si gni cant i mportance to the I slami c
bank management.
More speci cally, the results i ndi cate that
there i s a relatively hi gh degree of per ma-
nence i n the I slami c bank customer base
whi ch allows I slami c bank management to
i mplement vari ous long-ter m banki ng activi -
ti es, such as long nanci ng schemes, long-
ter m savi ngs programs, and launchi ng long-
ter m adverti si ng campai gns necessary to
achi eve a hi gher rate of growth.
4.1.2. Awareness and usage of Islamic
bank products and services
The Bahrai ni market for bank products/ ser-
vi ces i s characteri zed by a hi gh level of com-
peti ti on and comparatively small si ze, wi th a
conti nuous ow of new products/ servi ces. I n
thi s hi ghly competi tive envi ronment, I slami c
banks need to conduct peri odi c customer
surveys to i nvesti gate whether customers are
aware of thei r products/ servi ces and to know
how many of those products/ servi ces are
bei ng used on a regular basi s.
The awareness and usage of ten products/
servi ces offered by I slami c banks were sur-
veyed and the empi ri cal results are shown i n
Table I I I .
The results presented i n Table I I I i ndi cate
that the awareness percentage i s qui te hi gh
for three basi c deposi t schemes current
accounts (88.1 per cent), savi ngs accounts
(94.4 per cent) and i nvestment accounts (85
per cent). I n addi ti on, technology-based bank-
i ng faci li ti es i n the for m of automati c teller
machi ne cards were found to have a hi gh
degree of customer awareness (90.4 per cent).
However, the above results show that a
si gni cant porti on of bank customers
around 30 per cent are not aware of the
I slami c nanci ng schemes and almost two-
thi rds of the surveyed customers do not use
these faci li ti es.
Around half of the surveyed customers are
not aware of money orders/ drafts, or traveler
cheques offered by I slami c banks. Given the
consi derable number of resi dents travelli ng
and transferri ng money abroad every year,
these percentages of customer awareness of
those two products/ servi ces appear to be
relatively low. Thi s problem becomes more
evi dent as we consi der the very low percent-
ages of customer usage of those two servi ces,
13.3 per cent and 8.9 per cent respectively.
Thi s problem could be parti ally attri buted to
the wi despread populari ty of money
exchange compani es and other i nfor mal
channels of transfer used by the bank cus-
tomers i n Bahrai n.
Some products and servi ces such as forei gn
trade faci li ti es, letters of credi t and speci ally
ordered bank statements have received low
usage scores. However, given the fact that
these products/ servi ces are not frequently
used by the majori ty of bank customers (con-
venti onal banks or I slami c banks) i t seems
that the percentage usage of these
products/ servi ces, as reported i n Table I I I , i s
i n li ne wi th percentage usage of these ser-
vi ces i n other countri es.
Fi nally, one-half of the surveyed customers
are not aware of the speci ally ordered bank
statement servi ce, and only one-fth of the
customers use thi s servi ce. Given the
i mportance of thi s servi ce, I slami c banks
need to promote i t more effectively.
I n general, the empi ri cal ndi ngs regard-
i ng the awareness usage patter ns of I slami c
bank products/ servi ces conr m that the
usage rate i s well below the awareness level
for most of the products/ servi ces i nvesti gated
i n thi s study. Whi le thi s may be partly due to
the absence of a need for the servi ce, the
results suggest that speci c adverti si ng and
educati onal activi ti es may need to be under-
taken to i ncrease the level of customer aware-
ness and to narrow the gap between the
awareness levels and the usage rates. Per-
sonal selli ng and speci al promoti onal activi -
ti es can also be called upon to achi eve these
goals.
When compari ng usage rates reported i n
thi s study wi th those reported i n earli er stud-
i es (Channon, 1986; Tur nbull and Lewi s,
1982), i t can be stated that I slami c bank cus-
tomers i n Bahrai n behave i n a si mi lar fash-
i on to those customers deali ng wi th conven-
ti onal commerci al banks i n the UK and the
Tabl e III
Awareness and usage of key Islamic bank
products/ services
Type of product / servi ce % awareness % usage
1. Current account 88.1 55.6
2. Savi ngs account 94.4 86.7
3. Travel er cheques 43 8.9
4. Money order/ draft s 50.4 13.3
5. Aut omat i c t el l er machi ne 90.4 75
6. Fi nanci ng faci l i t i es 71.5 34.8
7. Let t er of credi t 28.9 14.1
8. Int ernat i onal nanci al
servi ces 30.4 6.7
9. Speci al l y ordered bank
st at ement s 50.7 19.3
10. Invest ment account s 85 63.8
[ 305 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7 [1998] 299313
USA. More speci cally, the results of thi s and
previ ous studi es i ndi cate hi gh levels of
awareness and usage of current accounts,
savi ngs accounts, and automati c teller
machi ne cards, and comparatively low levels
of awareness and usage of letters of credi t,
traveler cheques and money orders/ drafts.
4.2. The rel at i onshi p bet ween soci o-
demographi c fact ors and t he cust omer
usage of Isl ami c bank product s/ servi ces
To enri ch the ndi ngs reported above, a num-
ber of chi -square tests were conducted to
exami ne the relati onshi p between some
major soci o-demographi c factors and the
usage of I slami c bank products/ servi ces. The
outcome of these tests i s reported i n Table I V.
The results i n Table I V i ndi cate that there
i s a si gni cant relati onshi p between cus-
tomer age and the usage of current
accounts. A closer exami nati on of customer
responses revealed that thi s product i s rela-
tively more popular among the older cus-
tomers, 35-50 and above 50 years. About 75 per
cent of the respondents i n those two age
groups have clai med that they use thi s prod-
uct. However, only 35 per cent of the
customers i n the rst age group (below 25
years) have i ndi cated that they mai ntai n a
current account wi th thei r I slami c banks.
Further more, the X
2
results i n Table I V show
that there i s a si gni cant relati onshi p
between customer age and the usage of ATM
cards. Thi s servi ce appears to be more popu-
lar among those customers aged 25-50 years.
Approxi mately, 80 per cent of the respondents
aged 25-35 years and 70 per cent of those aged
35-50 years have reported that they use ATM
cards.
Fi nally, the X
2
results i n Table I V i ndi cate
that there are no observed patter ns of rela-
ti onshi ps between customers ages and the
other products/ servi ces i ncluded i n thi s
study. These ndi ngs suggest that the vari ous
other products/ servi ces provi ded by I slami c
banks, i ncludi ng the hi ghly popular savi ngs
account, appear to be used by many cus-
tomers across the vari ous age groups.
Regardi ng the relati onshi p between cus-
tomers i ncome and the usage of the vari ous
products/ servi ces offered by I slami c banks,
the results i n Table I V show that there i s a
si gni cant relati onshi p between customers
i ncome and the usage of current account as
i ndi cated by the si gni cant X
2
value of 39.1
and the usage of i nvestment account as i ndi -
cated by the X
2
of 9.88. An exami nati on of the
received responses i ndi cates that about 60 per
cent of the customers wi th monthly i ncome
between BD600-800, and 62 per cent wi th
monthly i ncome between BD800-1,000, and 90
per cent wi th monthly i ncome above BD1,000,
are regular users of current accounts. I n
addi ti on, the results presented i n Table I V
show that there i s also a si gni cant relati on-
shi p between customers i ncome and the
usage of money orders/ drafts, as i ndi cated by
the si gni cant X
2
value of 16.53. Once agai n,
the patter n of thi s relati onshi p shows that
customers i n the hi gh-i ncome groups are
more frequent users of money order/ drafts
than customers i n the other i ncome groups.
Further more, as expected, the results show
that there i s a si gni cant relati onshi p
between customers i ncome and the usage of
i nvestment accounts (X
2
= 9.88). These nd-
i ngs can provi de bank management wi th
useful i nfor mati on for developi ng appropri -
ate i nvestment accounts/ schemes for cus-
tomers i n the hi gh-i ncome groups. The
i nvestment account approxi mately repre-
sents more than 70 per cent of the total bank
li abi li ti es. As a result, speci al promoti onal
activi ti es wi ll be necessary to encourage
customers to use I slami c bank i nvestment
accounts. The remai ni ng X
2
values i n Table
I V do not i ndi cate any si gni cant patter n of
relati onshi p between the customers i ncome
and the usage of any other parti cular prod-
uct/ servi ce provi ded by I slami c banks.
Tabl e IV
The relationship between socio-demographic factors and the usage of key
Islamic bank products/ services
Soci o-dem
fact ors Ca SA TC ATM MOD FF LC IFF SOBS IA
Age
X
2
14.81 2.44 7.44 9.09 1.86 3.79 3.0 4.56 1.27 3.191
D 3 3 3 3 3 3 3 3 3 3
F 0.005 0.655 0.11 0.05 0.77 0.43 0.55 0.33 0.86 0.363
P
Income
X
2
39.1 5.04 5.47 2.81 16.53 8.62 3.8 5.62 6.16 9.88
D 5 5 5 5 5 5 5 5 5 5
F 0.001 0.54 0.48 0.83 0.01 0.19 0.69 0.47 0.41 0.01
P
Educat i on
X
2
13.5 4.44 2.92 11.11 10.76 8.20 0.98 0.54 3.60 1.85
D 4 4 4 4 4 4 4 4 4 4
F 0.02 0.48 0.71 0.05 0.05 0.14 0.96 0.99 0.61 0.60
P
Not es: (CA) Current Account; (SA) Savings Account; (TC) Travelers Cheques; (MOD)
Money Order/ Drafts; (ATM) Automatic Teller Machine Cards; (FF) Financing Facilities;
(LC) Letter of Credit; (IFF) International Financial Facilities; (SOBS) Specially Ordered
Bank Statement; (IA) Investment Accounts
[ 306 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7[1998] 299313
The results presented i n Table I V also i ndi -
cate that there i s a si gni cant relati onshi p
between the level of educati on and the usage
of the current account and ATM cards as
i ndi cated by the si gni cant X
2
values of 13.5
and 11.11 respectively. The frequency di stri b-
uti on for those two products/ servi ces reveals
that these two products are more popular
among the well-educated customers. These
ndi ngs have far-reachi ng i mpli cati ons for
for mulati ng I slami c banks adverti si ng strate-
gi es i n general and the medi a selecti on i n
parti cular.
4.3. The rel at i onshi p bet ween t he number
of years wi t h Isl ami c banki ng experi ence
and awareness of t he avai l abi l i t y of
di f ferent banki ng servi ces
A chi -square test of i ndependence i ndi cated
that there i s a si gni cant relati onshi p
between the number of years of I slami c bank-
i ng relati onshi p and the awareness of the
avai labi li ty of vari ous banki ng servi ces.
These ndi ngs suggest that the greater the
number of years for I slami c banki ng relati on-
shi p the hi gher the degree of awareness of
vari ous banki ng servi ces offered by the bank.
Successful marketi ng strategi es suggest that
I slami c banks need to have adequate adverti s-
i ng and promoti on activi ti es whi ch wi ll allow
thei r customers to have adequate i nfor ma-
ti on about the vari ous servi ces offered by the
bank. Those activi ti es, i f properly conducted,
can speed up the customers lear ni ng about
the vari ous bank servi ces as those
customers nor mally represent potenti al
users of the vari ous servi ces offered by the
I slami c banks.
4.4. Cust omer sat i sfact i on wi t h Isl ami c
bank product s/ servi ces
I n the hi ghly competi tive market for bank
products/ servi ces, I slami c banks are left wi th
no opti on but to apply the marketi ng concept.
More speci cally, I slami c banks need to be
customer-ori ented i nsti tuti ons. They should
deliver what thei r customers need. To achi eve
these goals, i t i s necessary to obtai n i n-depth
i nfor mati on on the customers levels of sati s-
facti on wi th the bank products/ servi ces
offered. The degree of sati sfacti on was mea-
sured usi ng a ve-poi nt Li kert type scale
rangi ng from very unsati sed (1) to very
sati sed (5).
Table V summari zes the study ndi ngs
regardi ng the degree of sati sfacti on wi th ten
banki ng products/ servi ces offered by I slami c
banks i n Bahrai n. I t should be noted that
customers would i ndi cate thei r degree of
sati sfacti on wi th a parti cular product or
servi ce only i f they are usi ng the product or
the servi ce. The mean sati sfacti on score for
each of the products/ servi ces, as well as i ts
respective rank, are presented i n Table V.
Based on the mean sati sfacti on scores pre-
sented i n Table V, and usage rates presented
earli er i n Table I I I , i t can be noti ced that
I slami c bank customers i n Bahrai n are most
sati sed wi th those products/ servi ces they
use most. For example, the savings account
received the highest usage rate of 86.7 per cent
(Table III), and it also received the second
highest mean satisfaction score of 3.76 (Table
V). The current account also reects a
si mi lar patter n wi th an average usage rate
(55.6 per cent) and a relatively above-average
mean sati sfacti on score of 3.3. The same can
be noti ced wi th i nvestment accounts whi ch
received a hi gh usage score of 63.8 per cent
and the hi ghest sati sfacti on score of 3.79.
These ndi ngs appear to be i n li ne wi th the
ndi ngs reported i n earli er studi es (Chan-
non, 1986; Tur nbull and Lewi s, 1982).
Further more, the results reported i n Table
V show that I slami c bank customers are not
qui te sati sed wi th the nanci ng faci li ti es
as i ndi cated by the low mean sati sfacti on
score of 1.83. I nfor mal i ntervi ews conducted
wi th some of the surveyed customers i ndi cate
some concer ns about the cost and exi bi li ty
of these nanci ng schemes. Money
orders/ drafts and traveler cheques also
received relatively low mean sati sfacti on
scores of 1.79 and 1.70 respectively.
I t i s worth noti ng that, despi te i ts relatively
hi gh awareness score of 90.4 per cent and
usage rate of 75 per cent, automati c teller
machi ne cards received only an average mean
sati sfacti on score of 3.0.
I n response to the low customer sati sfacti on
wi th several key I slami c banki ng
Tabl e V
Degree of satisfaction with key Islamic bank
products/ services
Degree of sat i sfact i on
Type of product / servi ce Mean score* Rank
Current account 3.30 3
Savi ngs account 3.76 2
Travel ers cheques 1.70 8
Money orders/ draft s 1.79 7
Aut omat i c t el l er machi ne
(ATM) 3.10 4
Fi nanci ng faci l i t i es 1.83 6
Let t er of credi t 1.52 9
Int ernat i onal nanci al faci l i t i es 1.45 10
Speci al l y ordered bank st at ement 2.00 5
Invest ment account s 3.79 1
Not e: * maximum =5
[ 307 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7 [1998] 299313
products/ servi ces (as reported i n Table V),
I slami c banks need to undertake concrete
steps to i mprove the quali ty of thei r prod-
ucts/ servi ces. Those steps may i nclude: con-
trolli ng thei r costs more effi ci ently i n order to
decrease the cost of thei r nanci ng schemes;
si mpli fyi ng thei r procedures especi ally those
associ ated wi th the vari ous types of nanci ng
schemes and other key products and servi ces;
moderni zi ng thei r ATMs to avoi d undue i nter-
rupti on of customer servi ces when usi ng
those machi nes; arrangi ng for adequate trai n-
i ng of thei r employees; and i mplementi ng a
program of regular i n-depth study to i denti fy
the vari ous types of deci enci es i n the provi -
si on of thei r products/ servi ces.
4.5. Sat i sfact i on wi t h t he basi c el ement s
of t he servi ce del i very syst ems
Before evaluati ng customer sati sfacti on wi th
I slami c bank servi ce delivery systems, three
basi c characteri sti cs of servi ces need to be
revi ewed. Those characteri sti cs are: i ntangi -
bi li ty, heterogenei ty and i nseparabi li ty of
producti on and consumpti on of the servi ce.
Servi ces are i ntangi ble because they are
perfor mances rather than objects (Lovelock,
1981). Most servi ces can not be measured,
counted, tested, stored, or veri ed i n advance.
Further more, servi ces, especi ally those wi th
a hi gh labor content, are heterogeneous. I n
other words, thei r delivery systems often
vary from one producer to another, from one
customer to another, and from one day to
another. As a result, i t i s very di ffi cult to
mai ntai n consi stent behavi or (i .e. uni for m
quali ty) from servi ce personnel. Fi nally, the
producti on and the consumpti on of many
servi ces are i nseparable. As a consequence,
quali ty of the servi ce occurs duri ng the ser-
vi ce delivery as i s the case for most bank
servi ces.
Servi ces are nor mally delivered through
multi -di mensi on systems. Sasser et al. (1978)
have i denti ed three basi c di mensi ons of
servi ce delivery systems. Those i nclude:
materi als, faci li ti es and personnel. The last
two of the three di mensi ons have a speci al
i mportance i n the delivery of bank servi ces.
The purpose of thi s secti on i s to i nvesti gate
the degree of customer sati sfacti on wi th the
basi c elements of the servi ce delivery systems
for I slami c banks i n Bahrai n. Table VI pre-
sents customer sati sfacti on scores as well as
the ranks for four major elements of prod-
uct/ servi ce delivery systems.
The results i n Table VI show that I slami c
bank customers appear to be hi ghly sati sed
wi th bank employees as i ndi cated by the
relatively hi gh sati sfacti on score of 4.08. Thi s
ndi ng reects I slami c bank long-standi ng
commi tment to hi re, trai n and mai ntai n
quali ed personnel. The war m, trustworthy
relati onshi p developed between I slami c bank
employees and the customers of the bank i s
largely attri buted to the management poli cy
regardi ng the emphasi s on the i mportance of
such relati onshi ps as a means of promoti ng
I slami c values i n the soci ety and furtheri ng
the vi abi li ty of I slami c bank systems.
Among the i nvesti gated elements of deliv-
ery systems, bank equi pment received a rela-
tively lowest sati sfacti on score (mean = 3.28).
Several i ntervi ews conducted wi th some
customers have revealed a common
complai nt about the effi ci ency of ATM i n
di fferent locati ons. The remai ni ng two ele-
ments of product/ servi ce delivery systems,
locati on and eveni ng banki ng hours, have
received adequate sati sfacti on scores of 3.48
and 3.37 respectively. Given the relatively
small si ze of Bahrai n, the number of I slami c
banki ng offi ces (head offi ces and branches)
appears to be adequate. Bahrai n I slami c
Bank, wi th i ts ve offi ces, appears to be pre-
sent i n the major populati on centers i n
Bahrai n. Thi s allows the bank to attract those
customers who emphasi ze the i mportance of
closer to home product/ servi ce delivery
systems. Fai sal I slami c Bank, through i ts
head offi ce i n Manama and i ts recently
opened branch i n Ri ffa, appears to be gai ni ng
momentum i n reachi ng customers i n major
populati on concentrati on areas.
4.6. Sel ect i on cri t eri a
Bank selecti on attri butes have been exten-
sively i nvesti gated i n the li terature (Hegazy,
1995; J avalgi et al., 1989; Khazeh and Decker,
1992; Ross, 1989). After a detai led revi ew of
these selecti on cri teri a and given the nature
of I slami c bank operati ons, products, ser-
vi ces, and phi losophy, four basi c attri butes,
were selected and tested i n the current study.
These widely investigated attributes adopted
from similar studies are: adherence to Islamic
principles, advice and recommendations of
fami ly and fri ends, conveni ence of the bank
locati on, and retur n on i nvestment.
Tabl e VI
Degree of satisfaction with the basic elements
of product/ service delivery systems
El ement s of
product / servi ce Degree of
del i very syst ems sat i sfact i on* Rank
Bank empl oyees 4.08 1
Equi pment 3.28 4
Locat i on 3.48 2
Eveni ng banki ng hours 3.37 3
Not e: *mean, maximum =5
[ 308 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7[1998] 299313
Si nce the goal of I slami c banks i s not li m-
i ted to the maxi mi zati on of the shareholders
wealth, but also i ncludes the enhancement of
the communi ty standard of livi ng and welfare
as prescri bed i n the I slami c pri nci ples, adher-
ence to those pri nci ples i n the banks transac-
ti ons i s expected to be used as a key selecti on
cri teri on (Hegazy, 1995), along wi th other
factors i ncludi ng advi ce and recommenda-
ti ons, conveni ence of bank locati on and
retur n on i nvestment. The relative i mpor-
tance of each of the i nvesti gated attri butes i n
the selecti on of I slami c banks i s shown i n
Table VI I .
The factor receivi ng the hi ghest degree of
i mportance i n the bank selecti on process i s a
reli gi ous factor, the adherence to I slami c
pri nci ples, wi th a score of 4.7. Thi s hi gh score
i ndi cates that the selecti on of I slami c banks
appears to be predomi nantly a reli gi ous-
based deci si on. Thi s result i ndi cates that
I slami c banks enjoy a relatively strong power-
base among those customers who emphasi ze
the adherence to the I slami c pri nci ples i n the
practi ces of the nanci al i nsti tuti ons they
select. However, thi s relative advantage has
been threatened i n recent years wi th several
conventi onal banks launchi ng thei r I slami c
i nvestment uni ts. The most recent example i s
Ci ti bank-Bahrai n whose I slami c i nvestment
uni t has begun i ts operati ons i n J une 1996.
Several other conventi onal banks are plan-
ni ng to follow the path of Ci ti bank, i ncludi ng
Arab Banki ng Corporati on (ABC) whi ch sti ll
plans to launch i ts I slami c i nvestment uni t i n
1998. I n the li ght of these developments, estab-
li shed I slami c banks are more than ever
under pressure to prove to thei r current and
prospective customers that they represent a
vi able banki ng alter native whi ch can com-
pete effectively wi th conventi onal banks i n
all areas of the banki ng busi ness. Fai lure to
achi eve thi s goal wi ll certai nly lead to the
erosi on of thei r tradi ti onal power-base among
thei r customers as some of them wi ll tur n to
those newly-establi shed I slami c i nvestment
uni ts that operate as part of the conventi onal
banks.
Compari ng the above results wi th those
reported i n previ ous studi es on bank selec-
ti on cri teri a (J avalgi et al., 1989; Kaynak and
Yavas, 1985; Ruddi ck, 1986), one can noti ce
that the si ngle most i mportant factor i n the
bank selecti on deci si on i s rate of retur n
offered i n the case of conventi onal banks,
whi le i t i s the adherence to I slami c pri nci -
ples i n the case of I slami c banks. Those
observed di fferences are largely related to the
di fferent theoreti cal bases of the two banki ng
systems. Whi le conventi onal commerci al
banks are i nterest-based nanci al i nsti tu-
ti ons, whose emphasi s i s on rate of retur n
(i nterest) offered or charged by the bank,
I slami c banks on the contrary are mai nly
prot and loss shari ng i nsti tuti ons that
emphasi ze the appli cati on of the I slami c
pri nci ples i n thei r nanci al transacti ons i n
order to achi eve economi c and soci al develop-
ment.
Further more, the results reported i n Table
VI I show that the second most i mportant
factor i n the selecti on of I slami c banks i s rate
of retur n, wi th a mean score of 3.85. Thi s
shows that I slami c bank customers sti ll con-
si der the rate of retur n, along wi th thei r reli -
gi ous commi tment, as key factors i n the
choi ce of thei r I slami c banks. Previ ous stud-
i es on bank selecti on cri teri a have shown that
the rate of retur n cri teri on i s a leadi ng factor
i n the selecti on of conventi onal banks
(Hegazy, 1995; J avalgi et al., 1989; Laroche et
al., 1986). The results of thi s study conr m
the i mportance of the rate of retur n cri teri on
i n the selecti on of I slami c banks.
The results presented i n Table VI I also
i ndi cate that the thi rd most i mportant factor
i n the selecti on of I slami c banks i s a refer-
ence-ori ented factor, reecti ng the relative
i mportance of fri ends and peers advi ce and
recommendati ons as a selecti on cri teri on.
The mean score of 3.51 for thi s factor i ndi -
cates a relatively strong role for fami ly and
fri ends i n passi ng on recommendati ons to
thei r members and peers regardi ng the bank
selecti on deci si on.
Fi nally, the conveni ence of bank locati on
was also found to have a consi derable role i n
the bank selecti on deci si on, wi th a score of
3.0. However, looki ng at the conveni ence
attri bute i n the context of other attri butes, i t
becomes evi dent that conveni ence of bank
locati on does not play the same role as the
other three attri butes.
4.7. The rel at i onshi p bet ween soci o-
demographi c fact ors and Isl ami c bank
sel ect i on cri t eri a
The relative i mportance of the selecti on cri te-
ri a, reported i n Table VI I , i s li kely to be
i nuenced by the vari ati on i n some
Tabl e VII
Degree of importance of factors affecting the
customer choice of Islamic banks
Degree of
Fact or i mpor t ance* Rank
Isl ami c pri nci pl es 4.7 1
Fami l y and fri ends 3.51 3
Conveni ent l ocat i on 3.00 4
Rat e of ret urn 3.85 2
Not e: * mean, maximum =5
[ 309 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7 [1998] 299313
soci o-demographi c factors such as age,
i ncome and educati on. To exami ne the rela-
ti onshi p between those factors and the
I slami c bank selecti on cri teri a, a number of
chi -square tests were conducted. Table VI I I
presents a summary of the outcome of these
tests.
Accordi ng to the results of the chi -square
tests presented i n Table VI I I , i t appears that
there i s a si gni cant relati onshi p between
customer age and the relative i mportance of
I slami c pri nci ples as a selecti on cri teri on.
Thi s i s i ndi cated by the hi gh value of chi -
square of 89.1 whi ch i s si gni cant at 0.000
level. A detai led exami nati on of the responses
reveals that more than 84 per cent of the cus-
tomers i n the 25-35 age group consi der
I slami c pri nci ples to be a very i mportant
vari able i n thei r bank selecti on deci si ons,
whi le only 56 per cent of the customers i n the
35-50 years age group consi der those pri nci -
ples to be very i mportant.
Based on these ndi ngs i t appears that
adherence to I slami c pri nci ples has a rela-
tively large i nuence on customers bank
selecti on deci si ons, especi ally on those rela-
tively younger customers (25-35 years). As
most of the customers i n thi s age group wi ll
be looki ng for I slami c nanci ng schemes to
nance thei r acqui si ti on of vari ous durable
goods, banks can respond posi tively by offer-
i ng vari ous nanci ng schemes to take
advantage of thi s fast-growi ng lucrative mar-
ket of relatively younger customers.
The results reported i n Table VI I I also i ndi -
cate that there i s a si gni cant relati onshi p
between customers i ncome and the relative
i mportance of the rate of retur n cri teri on
as i ndi cated by the si gni cant chi -square of
27.93. A detai led revi ew of the responses
received from the customers reveals that the
rate of retur n i s consi dered a relatively
i mportant cri teri on by users of the i nvest-
ment accounts, and that 75 per cent of the
users of the i nvestment accounts were i n the
hi gh-i ncome groups (BD400 and above). To
thi s segment of the market for I slami c nan-
ci al products/ servi ces, the rate of retur n
cri teri on appears to have a large i mpact on
thei r bank selecti on deci si on.
Further more, Table VI I I i ndi cates that
there i s a si gni cant relati onshi p between
customers age and the relative i mportance of
fami ly and fri ends as a bank selecti on cri te-
ri on as i ndi cated by the si gni cant chi -
square of 32.82. A closer exami nati on of the
responses reveals that 51 per cent of
customers i n the rst age group (less than 25
years) and 49 per cent of the customers i n last
age group (above 50 years) consi der thi s fac-
tor to be hi ghly i mportant i n thei r bank selec-
ti on deci si ons. However, only 36 per cent of
the customers i n the mi ddle age group (25-50)
consi der thi s factor to be i mportant. Based on
these results, i t can be concluded that the
younger and older bank customers are more
li kely to be i nuenced by thei r fami li es and
fri ends when maki ng thei r bank selecti on
deci si ons than those customers i n the mi ddle
age group. Thi s ndi ng has far-reachi ng
i mpli cati ons for for mulati ng adverti si ng and
promoti onal strategi es and plans for I slami c
banks.
Regardi ng the relati onshi p between the
customers educati onal level and the relative
i mportance of bank selecti on cri teri a, the
results presented i n Table VI I I reveal that
there i s a si gni cant relati onshi p between the
level of educati on and the relative i mportance
of I slami c pri nci ples i n the bank selecti on
process. Well-educated customers hi gh
school and college degrees tend to put more
emphasi s on I slami c pri nci ples i n selecti ng
thei r banks than those customers i n the other
educati onal groups. Further more, recom-
mendati ons and advi ce provi ded by fami ly
and fri ends tend to have more i nuence on
the less-educated customers, as i ndi cated by
the si gni cant X
2
value of 31.59. Fi nally, the
si gni cant X
2
value of 24.4 i ndi cates that
there i s a strong relati onshi p between the
customers level of educati on and the relative
i mportance of conveni ent locati on as a
selecti on cri teri on. A revi ew of the responses
received reveals that hi ghly-educated people
tend to put more emphasi s on the relative
i mportance of bank locati on as an attri bute of
thei r bank selecti on than do other customers
who are relatively less educated. The i mpli ca-
ti on of thi s ndi ng i s that I slami c banks
Tabl e VIII
Results of the chi square tests of the relationship between socio-
demographic factors and the relative importance of the selection criteria
Sel ect i on cri t eri a
Soci o-demographi c Isl ami c Fami l y and Conveni ent Rat e of
fact ors pri nci pl es fri ends l ocat i on ret urn
Age
X
2
89.1 32.82 26.92 11.19
DF 12 12 12 12
P 0.00 0.03 0.13 0.512
Income
X
2
75.27 31.58 24.79 27.93
DF 20 20 20 20
P 0.000 0.10 0.15 0.10
Educat i on
X
2
75 31.59 24.4 10.67
DF 16 16 16 16
P 0.001 0.05 0.10 0.557
[ 310 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7[1998] 299313
whose customer base i ncludes a large
number of well-educated customers, must
take i nto consi derati on the
preferences/ desi res of those customers when
choosi ng the locati on of thei r
offi ces/ branches. Agai n, thi s study conr ms
the i mportance of locati on as a bank selecti on
cri teri on, whi ch was also reported i n some
previ ous studi es (Hegazy, 1995; J avalgi et al.,
1989).
5. Concl usi on
Thi s study was desi gned to i nvesti gate the
banki ng behavi or of I slami c bank customers
i n the State of Bahrai n. A comprehensive
prole analysi s of I slami c bank customers
was conducted. Further more, customer
awareness of key I slami c bank products/ ser-
vi ces, thei r usage of those servi ces and thei r
sati sfacti on wi th the delivery systems uti -
li zed i n extendi ng them were also i nvesti -
gated . Fi nally, the key attri butes used by
I slami c bank customers i n maki ng thei r
selecti on deci si ons were also exami ned.
The general conclusi ons whi ch can be
derived from thi s study are:
Fi rst, the results of the study show that the
majori ty of I slami c bank customers are
well educated, wi th approxi mately 40 per
cent holdi ng hi gh school certi cates, and
about 50 per cent holdi ng a bachelor degree
or above. Further more, the results also
show that about 80 per cent of I slami c bank
customers fall between 25-50 years.
Second, the study results i ndi cate that more
than 75 per cent of I slami c bank customers
have had previ ous banki ng experi ence, and
about 54 per cent of the current customers
have mai ntai ned banki ng relati onshi p wi th
thei r I slami c bank for more than si x years.
Thi rd, the ndi ngs of the study show that
customer awareness and usage rates are
qui te hi gh for four key banki ng
products/ servi ces: current account (88.1
per cent ), savi ngs account (94 per cent),
ATM (90 per cent), and i nvestment accounts
(85 per cent). Among the least used prod-
uct/ servi ces were: money order drafts,
traveler cheques, letter of credi t and spe-
ci ally ordered bank statement.
Fourth, the study results i ndi cate that
whi le the current accounts, i nvestment
accounts, and ATM are mai nly used by hi gh
i ncome and well-educated customers, sav-
i ngs accounts were found to be very popu-
lar among all ranks of I slami c bank cus-
tomers.
Fi fth, the results of the study also i ndi cate
that I slami c bank customers i n Bahrai n
were found to be most sati sed wi th
products and servi ces they use most, wi th
i nvestment accounts receivi ng the hi gh-
est sati sfacti on score. Given the fact that
the i nvestment accounts represent more
than 70 per cent of total I slami c banks li a-
bi li ti es, i t appears that a large percentage of
i nvestment account holders are relatively
sati sed wi th the overall perfor mance of
thei r I slami c banks. Savi ngs accounts
received the second hi ghest sati sfacti on
score. However, the lowest sati sfacti on
score was associ ated wi th the I slami c
nanci ng schemes. Thi s suggests that
I slami c banks should re-exami ne thei r
nanci ng schemes wi th speci al attenti on
given to the procedures followed and the
true costs that customers usi ng those
schemes are actually payi ng.
Si xth, the results reported i n thi s study
i ndi cate that bank employees received the
hi ghest sati sfacti on score, followed by bank
equi pment.
Seventh, the results also i ndi cate that the
bank-selecti on deci si ons by bank
customers are predomi nantly reli gi ous-
based deci si ons. Adherence to I slami c
pri nci ples was found to be the most i mpor-
tant selecti on cri teri on, followed by rate of
retur n. I n thi rd place came the recommen-
dati ons made by fami ly and fri ends. Conve-
ni ence of locati on was found to be the least
i mportant selecti on cri teri on .
Recommendat i ons
1 I slami c banks need to desi gn and i mple-
ment vi able servi ce quali ty programs.
Fai lure to provi de the full range and the
ri ght quali ty of the servi ces wi ll i nevi tably
lead to seri ous di ffi culti es i n retai ni ng
thei r current customers and attracti ng
new ones. I n thi s regard, I slami c banks
may nd i t useful to exami ne the practi ces
of successful conventi onal banks i n order
to upgrade thei r programs for i mprovi ng
the quali ty of thei r servi ces.
2 The future of I slami c banks hi nges on
havi ng the most hi ghly-quali ed manage-
ment team, commi tted to the success of
these banks. Professi onali sm and compe-
tence are key i ngredi ents for successful
relati onshi ps wi th I slami c bank
customers. Trai ni ng programs may prove
to be a useful tool for i mprovi ng the man-
ageri al capabi li ti es of I slami c bank staff.
3 The results of the prole analysi s revealed
that the I slami c bank customers are rela-
tively young and have a hi gh i ncome.
These ndi ngs can be used as a basi s for
for mulati ng and launchi ng appropri ate
savi ng and nanci ng schemes that sui te
the demographi cs of the customers i n
those i ncome and age groups.
[ 311 ]
Saad A. Metawa and
Mohammed Almossawi
Banking behavior of Islamic
bank customers: perspectives
and implications
International J ournal of
Bank Marketing
16/ 7 [1998] 299313
4 Another noti ceable ndi ng was the gap
found between awareness and usage for
most products and servi ces i nvesti gated i n
the study. Thi s gap i s relatively wi de for
certai n products and servi ces such as
nanci ng faci li ti es. These ndi ngs
reveal the urgent need of I slami c bank
management for for mulati ng and i mple-
menti ng effective adverti si ng and promo-
ti onal strategi es to i ncrease the percent-
age of usage of thei r exi sti ng products/ ser-
vi ces as well as thei r new products/ ser-
vi ces.
Duri ng thi s study, I slami c bank customers
were requested to provi de any suggesti ons,
whi ch they thought, would i mprove the effec-
tiveness of bank servi ces. Those suggesti ons
are li sted below wi thout explanati ons or
elaborati on:
1 I mprove ATM servi ces through the acqui -
si ti on of new machi nes and/ or the proper
mai ntenance of the exi sti ng teller
machi nes.
2 Change of Thursday banki ng schedule
from 8.30-11.30 to 9.00 -12.30. Thi s would
provi de more conveni ence to the bank
customers.
3 I nfor mati on about the bank activi ti es and
the new lendi ng/ savi ngs schemes must be
communi cated through brochures handed
to customers.
4 Eveni ng banki ng servi ces should be pro-
vi ded by all branches on a dai ly basi s.
5 There should be a suffi ci ent amount of
parki ng avai lable to bank customers.
6 I ncrease number of tellers duri ng the rush
peri ods.
7 Banks must conduct qui ck and easy sur-
veys of the expressed percepti ons of the
customers regardi ng the servi ces offered,
i n order to i denti fy and correct mi sconcep-
ti ons.
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