Original Article

Bank image in the UAE: Comparing

Islamic and conventional banks
Received (in revised form): 13th August 2009

Hussein A. Hassan Al-Tamimi

is an associate professor of Finance at University of Sharjah, where he teaches financial management, corporate finance, investment
analysis, financial markets and institutions, banking operations and risk management. His current research focuses on capital budgeting,
risk management, corporate governance, financial performance and financial markets.

Adel Shehadah Lafi

is a chief financial officer at Al Habtoor Engineering Enterprises Company. His current research interest focuses on capital budgeting,
service quality and Islamic finance.

Md Hamid Uddin
is an associate professor of Finance at University of Sharjah. His area of research includes corporate finance, asset pricing, portfolio
investments, IPO price behavior and so on. He teaches investment and portfolio management, corporate finance, financial markets and
institutions, and international finance at both graduate and undergraduate levels.

ABSTRACT This study investigates how bank customers in the UAE view Islamic banks
versus conventional banks and whether this image affects customer loyalties or selection
of a bank. We distributed a questionnaire to a convenient sample of UAE bank customers
that focused on five areas: bank image, bank products, service quality, cultural aspects
and religious factors, in addition to demographic attributes of the sample. The main
findings of this study are: first, most UAE bank customers prefer banking with Islamic
banks, although they are not satisfied with the quality of products and services; second,
customers generally have a positive image of whatever bank they dealt with; third, the
regression analysis results indicate that the most important factor in choosing a bank
was bank products followed by service quality and then religious factors; fourth, there
is a significant difference between how customers perceive UAE Islamic banks versus
conventional banks; fifth, there is a significant difference in how customers perceive UAE
Islamic banks based on their gender, education and duration of the relationship; and
finally, there is a significant difference in how customers perceive UAE conventional
banks based on their gender.
Journal of Financial Services Marketing (2009) 14, 232–244. doi:10.1057/fsm.2009.17

Keywords: bank image; Islamic banks; conventional banks; bank products and services

Correspondence: Hussein A. Hassan Al-Tamimi
Department of Accounting, Finance and Economics,
College of Business Administration, University of Sharjah,
PO Box 27272, Sharjah, UAE
E-mail: hussein@sharjah.ac.ae
INTRODUCTION
This study explores how UAE customers
view Islamic banks and conventional banks.
We investigate whether this image affects
customer preference about the type of bank
they want to patronize. In the highly

© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
www.palgrave-journals.com/fsm/
 Comparing Islamic and conventional banks
competitive UAE market, banking
institutions are intensely concerned with
customers’ post-purchase behavior. They
recognize that merely satisfying customers is
not sufficient to retain their loyalty because
even satisfied customers may switch to
competitors. According to Ekrem et al,1 in
the past decade, firm image has been
recognized as a strategic tool to strengthen a
firm’s competitive position and improve its
profitability. But image alone may not be an
adequate source of competitive advantage, as
customers also want specific products and
services. Thus, customers’ image of UAE
banks and their services are related to
customer preferences.
According to the UAE Central Bank, the
banking community in the UAE comprises
46 banks, including 21 national banks and
25 foreign banks. Of the 21 national banks,
four are Islamic. Their total assets were AED
118 824 million (about US$32 360 million)
in 2006, compared with AED 873 156
million (about $237 788 million) for the
conventional banks, constituting around
13.6 per cent of total assets of all banks in
the UAE.2 In 2000, UAE Islamic banks had
96 branches compared to 582 branches for
conventional banks, representing 16.5 per cent
of the total number of branches of UAE
commercial banks.2
Even though there are some similarities
between the products and services of
conventional and Islamic banks, it is hard to
determine why UAE customers prefer to
deal with conventional rather than with
Islamic banks. We assume that because the
UAE is an Islamic country, demand for
Islamic banking services should be high.
Based on this assumption, Islamic banks have
a good opportunity to expand their activities
and attract more customers and subsequently
open more branches.
The small market share of Islamic banks
today, as noted above, and the small number
of branches implies that Islamic banks in the
UAE are not widely accepted. This study
investigates the reasons for this.
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
LITERATURE REVIEW
A number of empirical studies have
discussed service quality, product, satisfactory
relationships and their effect on bank image
and loyalty. We review some of the most
recent studies below but first we review the
literature on the three core aspects of our
study: conventional and Islamic banks, bank
image and service quality
Conventional and Islamic bank
products
Islamic and conventional banks are extremely
different in products and in basic principles.
The former is based on a Shariah foundation
(Islamic principles) and all dealings,
transactions, business approaches, product
features, investment focus, and responsibility
are derived from the Shariah law, leading to
many operational differences compared to
conventional banking. For example, when
lending money, participation in partnership
business is the main function of the Islamic
banks. In contrast, lending money and
getting it back with compound interest is
the business goal of conventional banks.
In Islamic banking, the creditor should not
take advantage of the borrower and there
should be no reward without taking a risk.
Although Islamic banks do not charge a
pre-determined interest rate as conventional
banks do, they charge a certain amount upon
the initial agreement between the bank and
the borrower.
Conventional banking is essentially based
on the debtor-creditor relationship between
the depositors and the bank, and between
the borrowers and the bank. Interest is
considered the price or cost of borrowing,
reflecting the opportunity cost of money.3
A comparison between conventional and
Islamic banks is provided in the Appendix.
Bank image
Boyle4 defined image as ‘the total impression
an entity makes on the minds of people’
whereas Worcester 5 defined corporate image
as ‘the net result of the interaction of all
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 Al-Tamimi et al
experiences, impressions, beliefs, feelings and
knowledge people have about the company’.
Image can be classified into three types:
corporate image, which reflects the way
people view the whole corporation; product
image or the way people view a particular
product category; and brand image, which
reflects the way people view a particular
brand compared to other brands.5 According
to Ekrem et al, banks today have image and
identity problems. They have failed to keep
consumers satisfied and face ever-increasing
competition in markets with little growth in
demand. Ekrem et al1 concluded that a
favorable bank image is a critical aspect of
a company’s ability to maintain its market
position and affects core aspects of
organizational success such as customer
patronage. A favorable bank image has
a positive impact on performance and
sustainable growth, including market share,
over time.
Service quality
Gronroos6 defines service quality as the
fulfillment of customers’ expectations.
Parasuraman et al7 identified 10 determinants
of service quality generic to the service
industry, including tangibles, reliability,
responsiveness, competence, courtesy,
credibility, security, access, communication
and understanding the customer.
Later, Parasuraman et al 8 developed a
22-item instrument called SERVQUAL
that has become widely used as a generic
instrument for measuring service quality.
SERVQUAL examines five dimensions
consistently ranked by customers as the most
important for service quality, regardless of
service industry. They are:
Reliability – the ability to perform the
promised service dependably and accurately.
Tangibles – appearance of physical facilities,
equipment, personnel and communication
materials.
Responsiveness – willingness to help customers
and provide prompt service.
234 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
Assurance – knowledge and courtesy of
employees and their ability to convey trust
and confidence.
Empathy – the level of caring and
individualized attention the firm provides its
customers.
SERVQUAL scores were defined as the gap
between customers’ expectations of service
quality and their perception of the service
quality experience.
Howcroft9 defines service quality in banking
as consistently anticipating and satisfying the
needs and expectations of the customer.
Lewis10 says that in the banking industry,
gap analysis has been accepted as a critical tool
to measure current levels of service quality.
The relationship between image and loyalty
has remained a matter of debate among
researchers. Liew, in ‘Banking on a Sharper
Image’, states that the UK banking industry is
concerned about its confusing image. This
raises the question, How can banks establish
programs to create a better image? Liew’s
study revealed that clearing banks are often
seen as positive institutions: large and powerful
but not customer oriented. Smaller banks are
thought to provide more sensitive and friendly
services. He also concluded that bank image
has far more to do with the underlying policy
of the institution than any advertising
activity.10 The relationships among image,
advertising efficiency, customer satisfaction,
customer expectation, perceived quality,
perceived value, customer complaints and
customer loyalty have been investigated by
Ekrem et al.1 They found that bank image and
advertising efficiency influence customer
loyalty and the antecedents of loyalty
significantly.
Bravo et al studied the impact of bank
image on consumer behavior to identify the
main corporate associations that individuals
consider when selecting a bank or savings
bank. They classified the sample into two
groups, customers and non-customers of
banking institutions. The corporate image of
commercial banks, according to Bravo et al,11
 Comparing Islamic and conventional banks
includes services offered, accessibility,
corporate social responsibility, global
impression, location and personnel. Their
work justifies the importance of satisfaction
since it explains to a great extent an
individual’s intention to continue using the
services of a particular bank.
Kassim and Souiden studied customer
retention measurement in the UAE banking
sector. There are major differences between
our study and theirs. Our study compares
UAE Islamic banks and conventional banks,
investigates the image UAE customers have
of Islamic banks and conventional banks and
determines whether this image affects
customer loyalties or preference for the type
of bank they deal with. Kassim and
Souiden’s12 study, in contrast, explores how
image, perceived service quality and
satisfaction determine retention in a retail
bank setting. They found that image is both
directly and indirectly related to retention
through satisfaction, while perceived service
quality is indirectly related to retention
through satisfaction.
Eakuru and Nik Mat13 studied the
antecedents of customer loyalty in banks in
South Thailand. They viewed customer
loyalty as crucial to long-term profitability
and managing services. They found that
perceived service quality relates positively to
customer satisfaction, image relates positively
to customer loyalty, image relates positively
to commitment, and trust relates positively to
commitment. Ehigie14 explored customer
loyalty to Nigerian banks by looking at how
customer expectations, perceived service
quality and satisfaction predict loyalty. He
concluded that perception of service quality
and satisfaction are significant determinants of
customer loyalty, with customer satisfaction
contributing more.
Fyayan et al15 studied the use of Internet
banking services and its effect on bank image
in order to develop a reliable and valid scale
to measure the corporate image of a bank in
the context of the Internet. According to
their research, an Internet bank’s image is a
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
multidimensional construct composed of its
reputation and security as perceived by the
consumer, as well as of the services offered
and accessibility. A study by Joseph and
Stone16 on the impact of technology on
service delivery and customer perceptions
among US customers found a bank’s ability
to provide quick, convenient, personalized,
and user-friendly electronic services and the
accuracy, security and convenience of
accessing information via electronic
technology have a significant impact on
customer perceptions of service quality.
Their study also reported that consumers
have a positive perception of technology-
based services, as they believe technology
delivers services faster and more efficiently
than employees. This may lead to a positive
image followed by customer satisfaction and
loyalty as described above.
Sureshchandar et al17 examined customer
perceptions of service quality in the banking
sector of a developing economy, India. They
concluded that the three groups of banks in
India (public, private sector and foreign) vary
significantly in delivering the five service
quality factors: core service, human elements
of service delivery, non-human elements,
tangibles of service and social responsibility.
Their results also indicated that foreign banks
perform best, followed by private sector
banks and public sector banks.
Zineldin18 examined the relationship
among product, service quality and customer
management in the Swedish banking
industry, finding that a bank must create
customer relationships that deliver value
beyond that provided by the core products.
Banks can do this by adding tangible and
intangible elements to the core products.
The necessary condition for creating quality
and value added according to this study is
quality measurement and control. Zineldin
concluded that the most important quality
criteria used by customers in selecting a bank
related to delivery system and service quality,
reflecting the importance of reliability and
responsiveness of the bank. An unsatisfied
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 Al-Tamimi et al
customer is probably a potential customer for
a competing bank and word-of-mouth from
a disappointed and unsatisfied customer may
harm the bank’s image.
Dusuki and Abdullah19 studied why
Muslim customers prefer to deal with Islamic
banks, using a sample of 750 respondents
from four different regions in Malaysia. They
concluded that the selection of Islamic banks
was a combination of Islamic and financial
reputation and quality service offered by the
bank. Other important factors in bank
selection included good social responsibility
practices, convenience and product price.
Haron et al 20 surveyed 301 Islamic and
conventional bank customers, also in
Malaysia, and found that the most important
factors in bank selection were fast and
efficient services, speed of transactions,
friendliness of bank personnel and
confidentiality of the bank. They also
reported that 40 per cent of the respondents
said that religion was a prime reason for
using Islamic banking services. Although
there was a high level of awareness of
Islamic products among customers, they
did not understand the differences
between Islamic and conventional banking
services.
Al-Tamimi and Al-Amiri21 investigated
service quality in UAE Islamic banks using
a sample of 311 customers from two UAE
Islamic banks. They found a positive and
statistically significant relationship between
overall service quality and the SERVQUAL
dimensions. Empathy and tangibles were
the most important dimensions and there
was no significant difference between level
of overall service quality between the
Dubai Islamic Bank and Abu Dhabi
Islamic Bank.
Naser et al22 assessed customer awareness
and satisfaction towards Islamic banks in
Jordan using a sample of 206 customers,
finding a certain degree of satisfaction with
many Islamic banks’ facilities and products.
However, the respondents expressed
dissatisfaction with some of the Islamic
236 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
banks’ services. The findings also indicated
that a majority of customers banked with
Islamic banks because of religion. Metawa
and Almossawi23 focused their study on
customers of Bahrain Islamic Bank and Faisal
Islamic Bank of Bahrain, finding that
customers considered their Islamic principles
the most important factor in selecting a bank,
followed by rewards extended by the banks,
influence of family and friends, and
convenient location. Metawa and Almossawi
concluded that socio-demographic factors
such as age, income and education were
important criteria in bank selection, a
finding that indicates religion as the
most important reason for customers
patronizing Islamic banks.
In sum, researchers have devoted many
studies to exploring the relationship among
service quality, customer satisfaction, the use
of technology and loyalty or bank image.
But more research is needed, particularly in
the area of Islamic banking and specifically in
the context of the Arab World, including the
UAE. Arab countries are generally Muslim
and there is a high demand for Islamic
banking products and services.
RESEARCH METHODOLOGY
Research questions and
hypotheses
The study intends to answer the following
three questions:
1. Is the first preference of UAE customers
is Islamic banks or conventional banks?
2. If the first preference of UAE customers
is Islamic banks, is it based on the type
and quality of products or the type and
quality of services or on religious and
cultural factors?
3. If the first preference of UAE customers
is conventional banks, is this preference
based on type and quality of products or
type and quality of services?
 Comparing Islamic and conventional banks
We also formulate the following three
hypotheses:
Hypothesis 1: There is a significantly posi-
tive relationship between the image of
UAE banks and the quality of bank
services, the level of satisfaction with
bank products, and religious and cultural
factors.
Hypothesis 2: There is a significant differ-
ence between customers’ image of UAE
Islamic banks and their image of conven-
tional banks.
Hypothesis 3: Customers’ image of UAE
banks varies depending on their age, gen-
der, education and length of relationship
with the bank.
As far as the researchers know there is
no existing instrument that fits the purpose
of this study. We therefore developed a
modified questionnaire based mostly on
the instrument developed and tested by
Parasuraman et al, Meiss Alison et al,
Bloemer et al and Al-Tamimi and
Al-Amimri.8,21,24–25 We first distributed the
questionnaire to seven experts (three
academics and four practitioners) to examine
the scales, as suggested by Devellis.26
Accordingly, the authors revised the first
draft by eliminating, adding or rewording
some of the questions. There were English
and Arabic versions of the questionnaire,
depending on the respondents’ preference.
The questionnaire has five parts. The first
part consists of demographic attributes: age,
gender, employment status, education and
number of years as a bank customer. The
second part concerns bank image and
includes 28 questions. The third part consists
of 14 questions about bank products. The
fourth part has 35 questions about service
quality using a 7-point Likert scale to
compare perception of quality with
expectations. There are six items on the
tangibles, seven items on reliability, seven on
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
assurance, five items on responsiveness and
nine items on empathy. Part four also
includes one question measuring overall
service quality. The last part includes a
general question about whether respondents
prefer conventional or Islamic banks, and the
reasons for their choice.
Sampling and data collection
This research uses a convenient sample of
UAE bank customers because it was
impossible to distribute questionnaires to all
customers. It was not possible to get
confidential information about customer
characteristics from banks in order to classify
them into different groups for research
purposes. The questionnaires were distributed
in two ways: some were handed to branch
managers who were requested to pass them
along to their customers. The authors hand-
delivered other questionnaires. Customers
could select questionnaires in English or
Arabic. From the 800 questionnaires
distributed, we received 620 responses, of
which 362 were excluded because of
incomplete data. The remaining 257 usable
questionnaires represent a response rate of
32.25 per cent, considered acceptable. The
questionnaires were distributed to customers
of the four Islamic banks and the major
conventional banks in the three largest cities
of the UAE: Abu Dhabi, Dubai and Sharjah.
More than 80 per cent of the UAE
population lives in these three cities. There
were 178 respondents (69.3 per cent) from
Islamic banks and 79 (30.75 per cent) from
conventional banks
DATA ANALYSIS AND
DISCUSSION
The data analysis has three parts: the profile
of the respondents, reliability of the measures
and testing the hypotheses.
Profile of study respondents
The study’s respondents were asked to
provide demographic data on age, gender,
income, education and duration of
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 Al-Tamimi et al

banking relationship. Table 1 shows that Reliability

about 10.1 per cent of the respondents were Reliability of the measures was
18–25-year-old, 44.4 per cent were 26–35- assessed using Cronbach’s  to measure
year-old, 28.8 per cent were 36–45-year-old, the reliability of the different categories
12.1 per cent were 46–55-year-old, 4.7 that influence bank image. It estimates
per cent were 56–65-year-old and the how much variation in scores of different
remaining 0.5 per cent were 66-year-old variables is attributable to chance or random
or more. errors.27
Males comprised 85.6 per cent and females A coefficient greater than or equal to
14.4 per cent. With respect to education, 6.2 0.7 is considered acceptable and a good
per cent had less than a high school diploma indication of construct reliability.28
and 6.6 per cent were high school graduates. Cronbach’s  for the categories ranges
Of the college graduates, about 18.7 per cent from 0.907 to 0.927, showing that these
were diploma or higher diploma holders, measures are reliable (see Table 2).
45.9 per cent had a bachelor’s degree and
the remaining 22.6 per cent had postgraduate
degrees. Descriptive statistics
Table 1 also displays duration of banking Table 3 gives descriptive statistics for bank
relationship and shows that 46.3 per cent of image by categories that influence image,
the respondents have had a relationship with namely the five dimensions of service quality:
UAE banks for four or more years, while tangibles, reliability, responsiveness, assurance
53.3 per cent have dealt with these banks for and empathy.
fewer than 4 years. The statistics include overall service
quality, religious factors and cultural factors.
Table 1: Respondents’ characteristics
Mean values in Table 3 show a mean for
bank image of 4.9, which generally indicates
Variable Frequency % that UAE bank customers have a positive
Age (year) image of their bank. The range of mean
18–25 26 10.1 values of service quality dimensions and
26–35 114 44.1
36–45 74 28.8 overall service quality is 4.7–5.3, indicating
46–55 31 12.1 that UAE bank customers are satisfied with
56–65 10 3.9
65 and more 2 0.8 overall service quality.
Table 3 shows that the tangible
Gender
Female 37 14.4
dimension has the highest mean. The
Male 220 85.6 mean values of service quality dimensions
and overall service quality indicate that
Education
Below high 16 6.2 UAE bank customers are satisfied with
school overall service quality consistent with the
High school or 17 6.6
equivalent findings of Naser and Jamal.23 The mean
Diploma/higher 48 18.7 value of religious factors and cultural
diploma
Bachelor or 118 45.9 factors is 4.55 and 4.7, respectively,
equivalent indicating that these two categories are
Graduate 58 22.6
degree
important to customers and we should
consider the effect of these two categories
Duration (year) on bank image. The importance of the
Less than 2 50 19.5
2 to less than 4 87 33.9 religious factors is in line with the findings
4 to less than 6 24 9.3 of Naser et al, Haron et al, and Metawa
6 and more 96 37.4
and Almossawi.22,20,23

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 Comparing Islamic and conventional banks

Table 2: Reliability of the categories that influence bank image

Category Items – Part II of the questionnaire No. of items 

Bank products Items 29–38 10 0.912

Service quality: Tangible dimension Items 41–46 and Item 69 6 0.911
Service quality: Reliability dimension Items 47–54 9 0.907
Service quality: Responsiveness dimension Items 55–59 5 0.911
Service quality: Assurance dimension Items 60–65 6 0.910
Service quality: Empathy dimension Items 66–68 and Items 70–72 6 0.905
Religious factors Items 74–76 3 0.922
Cultural factors Items 77–78 2 0.927

Table 3: Descriptive statistics

Category N Minimum Maximum Mean SD

Bank image 255 1.79 6.54 4.9360 1.04119

Bank products 257 1.36 6.64 4.6958 1.17365
Service quality: Tangible dimension 257 1.50 7.00 5.3236 1.01219
Service quality: Reliability dimension 257 1.11 6.64 5.1375 1.21372
Service quality: Responsiveness dimension 257 1.40 7.00 5.1136 1.23333
Service quality: Assurance dimension 257 1.67 7.00 5.0837 1.18532
Service quality: Empathy dimension 257 1.11 7.00 5.1375 1.21372
Overall service quality 257 1.00 7.00 4.8988 1.82792
Religious factors 257 1.00 7.00 4.5512 1.48899
Cultural factors 257 1.00 7.00 4.7082 1.64366

Bank preferences of UAE customers Testing the study’s hypotheses

Table 4 summarizes responses on bank
preferences. About 70 per cent of
respondents prefer banking with Islamic
banks whereas 30 per cent prefer
conventional banks. Of those who prefer
Islamic banks, about 26 per cent cite the
quality of products and services whereas
58 per cent cite the quality of products
provided by Islamic banks. Only 16 per cent
of respondents attributed their first preference
to the quality of services provided by Islamic
banks. Islamic banks clearly need to improve
the services provided. About 51 per cent of
respondents indicate that their primary reason
to bank with conventional banks is the
quality of products and services, whereas
28 per cent cite the services provided and
about 21 per cent quality of products. The
results indicate that UAE bank customers are
more enthusiastic about their banks than
conventional bank customers are about their
banks. We believe this implies that Islamic
banks have more potential for development
and expansion, but they need to develop
their services.
To assess the predictive ability of different
factors such as bank product (PROD),
measures of service quality (SERVQ), religious
factors (RELG) and cultural factors (CULT), a
linear regression analysis was performed with
bank image (IMG) as the dependent variable.
The regression model is as follows:
IMG = f (PROD,SERVQ, RELG,CULT
where PROD – bank products; SERVQ –
service quality measured by the five
dimensions: tangible(TAN), reliability(REL),
responsiveness(RES), assurance(ASS) and
empathy(EMP); RELG – religious factors;
and CULT – cultural factors.
We conducted a multicollinearity test to
assess the degree of correlation among the
independent variables, shown in Table 5.
The ‘rule of thumb’ test, as proposed by
Anderson et al,29 suggests that any correlation
coefficient exceeding (0.7) indicates a
potential problem. Because, as the table
shows, there was a multicollinearity problem,
we dropped five independent variables from

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 Al-Tamimi et al

Table 4: Bank preferences of UAE customers

Type of bank Quality of products Quality of services Quality of products

and services
No. % No. % No. % No. %

Islamic banks 178 69.3 103 57.9 29 16 46 25.8

Conventional banks 79 30.7 17 21.5 22 27.8 40 50.7

Table 5: The correlation coefficients between independent variables

PROD TAN REL RES ASS EMP RELG CULT

PROD 1.000 — — — — — — —
TAN 0.682** 1.000 — — — — — —
REL 0.615** 0.771** 1.000 — — — — —
RES 0.584** 0.696** 0.844** 1.000 — — — —
ASS 0.584** 0.734** 0.804** 0.804** 1.000 — — —
EMP 0.633* 0.727** 0.819** 0.773** 0.821** 1.000 — —
RELG 0.448** 0.389** 0.374** 0.342** 0.330** 0.511** 1.000 —
CULT 0.449** 0.398** 0.375** 0.319** 0.328** 0.499** 0.932** 1.000
**correlation is significant at 0.05 level.

the regression model, namely TAN, RES,
ASS, EMP and CULT. The remaining three
variables were bank product (PROD),
reliability (REL) as a measure of service
quality, and religious factors (RELG). These
factors represent a good combination of the
factors that influence bank image. Table 6
shows that the result of the regression model
R2 is 0.85. This indicates that the three
independent variables explain 85 per cent of
the variations of bank image. The R2 is
significant at the 0.01 level. The estimated
coefficients of two independent variables
were, as expected, positive and statistically
significant at the 1 per cent level. However,
the value of coefficients and t statistics
indicate that bank products are the most
influencing factor, followed by service quality
measured by reliability and then religious
factors. The three variables have a positive
effect on customer image of UAE banks,
which confirms Hypothesis 1. This is
consistent with the findings of Zineldin and
Ekrem et al.18,1 The cultural factors were
dropped because of the multicollinearity
problem.
Regarding the first preference of customers
of the two types of banks, we ran the same
regression model for each type. Table 6
reveals almost the same results for the
two types, which confirms Hypothesis 1.
However, the coefficient of the religious
factor (RELG) is, as expected, positive and
statistically significant for Islamic banks but
statistically insignificant for conventional
banks.
Differences of bank image based
on demographic variables
To test the remaining two hypotheses, we
ran a one-way ANOVA whose results will
be ordered according to the research
hypotheses.
Table 7 reveals that there is no significant
difference between customers’ image of
UAE Islamic banks and their image of
conventional banks. These results were not
expected because we assumed that each of
these two types of banks has its own
strategies and policies on bank products and
service quality. Therefore, the bank image
should be different or otherwise Islamic bank
products and services are the same as those
of conventional banks. This is not the actual
case as, for example, Islamic financial
instruments such as bonds (Sukuk), Murabaha

240 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
 Comparing Islamic and conventional banks

Table 6: Summary of regression results

Independent variable Beta t Significance

(a) UAE banks

(Constant) — 5.003 0.000
PROD 0.571 13.009 0.000
REL 0.300 7.105 0.000
RELG 0.116 3.083 0.002
R2: 0.850
Adjusted R2: 0.723
Standard error of the estimate: 0.551

(b) UAE Islamic banks

(Constant) — 2.032 0.044
PROD 0.581 12.221 0.000
REL 0.307 6.753 0.000
RELG 0.146 3.425 0.001
R2: 0.866
Adjusted R2: 0.745
Standard error of the estimate: 0.529

(c) UAE conventional banks

(Constant) — 4.590 0.000
PROD 0.506 5.033 0.000
REL 0.334 3.400 0.001
RELG 0.046 0.594 0.554
R2: 0.791
Adjusted R2: 0.610
Standard error of the estimate: 0.588

Table 7: The results of analysis of variance for Islamic banks and conventional banks

Source Sum of squares DF Mean square F-value Significance

Bank image — 94 — — —
Between groups 20.785 160 0.221 1.073 0.344
Within groups 32.964 254 0.206 — —

Total 53.749 — — — —

and profit-sharing are not the same as
conventional financial instruments.
Table 8 shows the results of one-way
ANOVA analysis for the UAE Islamic banks’
customer image and demographic variables to
test Hypothesis 3. There is a significant
difference in customers’ image of UAE
Islamic banks based on gender, education and
duration of relationship, statistically significant
at 1 per cent, 5 per cent and 10 per cent,
respectively. These results partially confirm
Hypothesis 3. However, the results indicate
that there is, unexpectedly, no significant
difference in customers’ image of UAE
Islamic banks based on age.
Table 9 reveals the results of one-way
ANOVA analysis for the UAE conventional
banks’ customer image and demographic
variables. There is a significant difference in
customers’ image of UAE conventional banks
based on gender at a 1 per cent level,
confirming Hypothesis 3 for conventional
banks. But because the sample has such a
small percentage of females (14.4 per cent),
we need to interpret the results cautiously.
Unexpectedly, we find that there is
a significant difference in customers’ image
of UAE conventional banks based on age,
education and duration. Hypothesis 3 was
not confirmed.

© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244 241
 Al-Tamimi et al

Table 8: One-way ANOVA test: The UAE Islamic banks’ customer image and demographic variables

Between groups Sum of squares DF Mean square F-value Significance

Age 80.176 78 1.028 0.945 0.600

Gender 10.556 78 0.135 1.682 0.007
Education 114.952 78 1.474 1.501 0.028
Duration 116.849 78 1.498 1.379 0.065

Table 9: One-way ANOVA test: The UAE conventional banks’ customer image and demographic variables

Between groups Sum of squares DF Mean square F-value Significance

Age 61.145 59 1.036 1.578 0.149

Gender 11.078 59 0.188 3.192 0.005
Education 48.797 59 0.827 1.506 0.176
Duration 92.152 59 1.562 0.895 0.640

CONCLUSIONS AND Based on these conclusions, we recommend

RECOMMENDATIONS
This research investigates the image held
by UAE customers of Islamic banks and
conventional banks to learn whether this
image affects their preference for the type
of bank they do business with. We used a
modified questionnaire in English and Arabic
which was distributed to a convenient sample
of UAE bank customers of four Islamic banks
and the major conventional banks in Abu
Dhabi, Dubai and Sharjah. Of the 257
respondents, 178 or 69.3 per cent were from
Islamic banks and 79 or 30.7 per cent from
conventional banks. Our main findings are:
first, most UAE bank customers prefer Islamic
banks; second, UAE bank customers generally
have a positive image of the bank they dealt
with; third, UAE bank customers are satisfied
with overall service quality; fourth, the most
influencing factor on bank image was bank
products, followed by service quality and
religious factors, consistent with the findings
of Zineldin and Ekrem et al1,18; fifth, there is
no significant difference between customers’
image of UAE Islamic banks and conventional
banks; sixth, as expected, there is a significant
difference in the image of UAE Islamic bank
customers based on gender, education and
duration of relationship; and finally, there is a
significant difference in the image of UAE
conventional bank customers based on age,
education and duration.
that Islamic banks devote greater efforts to
improve their image. Both conventional and
Islamic banks need to emphasize service
quality more, especially reliability. They need
to respond better to inquiries, have adequate
cash in cash machines, staff available to
help, speedy, efficient transactions and easily
accessible branches. Islamic banks need to
concentrate more on service quality, as only
16 per cent of Islamic bank customers prefer
banking with them because of the quality of
services provided.
RESEARCH LIMITATIONS
This study deals with the effect of service
quality and bank products on bank image.
To the best of our knowledge, no other
study includes these three aspects. This
represents a limitation, as it is difficult to
compare our results or even to use the
results of previous studies as a benchmark.
The second limitation of this study is that
the research would have been more valuable
if the sample were divided into Muslims and
non-Muslims. This might tell us something
about the effect of religion on customer
banking behavior. The third limitation
concerns the high degree of incomplete
responses – more than 50 per cent – which
led us to eliminate more than half of the
returns.

242 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
 Comparing Islamic and conventional banks
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APPENDIX
See Table A1.
Table A1: Comparison of conventional and Islamic banks
Conventional banks
1. The functions and operating modes of conventional
banks are based on fully manmade principles.
2. The investor is assured of a predetermined rate of
interest.
3. It aims at maximizing profit without any restriction.
4. It does not deal with Zakat.
5. Lending money and getting it back with compounding
interest is the fundamental function of the
conventional banks.
6. It can charge additional money (penalty and
compounded interest) in case of defaulters.
7. Very often it results in the bank’s own interest
becoming prominent. It makes no effort to ensure
growth with equity.
8. For interest-based commercial banks, borrowing
from the money market is relatively easier.
9. As income from the advances is fixed, it gives little
importance to developing expertise in project
appraisal and evaluations.
10. The conventional banks give greater emphasis on
credit-worthiness of the clients.
11. The status of a conventional bank, in relation to its
clients, is that of creditor and debtors.
12. A conventional bank has to guarantee all its deposits.
244 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
Islamic banks
1. The functions and operating modes of Islamic banks
are based on the principles of Islamic Shariah.
2. In contrast, it promotes risk sharing between provider of
capital (investor) and the user of funds (entrepreneur).
3. It also aims at maximizing profit but subject to Shariah
restrictions.
4. In the modern Islamic banking system, it has become
one of the service-oriented functions of the Islamic
banks to be a Zakat Collection Centre and they also
pay out their Zakat.
5. Participation in partnership business is the fundamental
function of the Islamic banks. So we have to
understand our customer’s business very well.
6. The Islamic banks have no provision to charge any
extra money from the defaulters. Only small amount
of compensation and these proceeds are given to
charity. Rebates are given for early settlement at the
bank’s discretion.
7. It gives due importance to the public interest.
Its ultimate aim is to ensure growth
with equity.
8. For the Islamic banks, it must be based on a Shariah
approved underlying transaction.
9. As it shares profit and loss, the Islamic bank pays
greater attention to developing project appraisal and
evaluations.
10. The Islamic banks, on the other hand, give greater
emphasis on the viability of the projects.
11. The status of Islamic bank in relation to its clients is
that of partners, investors and trader, buyer and seller.
12. Islamic bank can only guarantee deposits for deposit
account, which is based on the principle of al-wadiah,
thus the depositors are guaranteed repayment of their
funds, however if the account is based on the
Mudarabah concept, the client has to share in a
loss position.
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