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Customers' attitude toward Islamic banking in Pakistan

  • Kun-ho Lee
  • Shakir Ullah
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    Purpose – The purpose of this paper is to examine the different motivational factors that lead to customers' Islamic bank selection decision in Pakistan. In particular, it aims to look into the importance of Shari'a compliance for Islamic banks' customers and thereby the potential risk of deposits withdrawal in case of violations of Shari'a principles. Design/methodology/approach – The paper presents descriptive statistics and cross-tabulation analysis based on data collected from 357 customers. Findings – The findings reveal that Islamic banks' customers highly value Shari'a compliance in their banks and that non-compliance with Shari'a principles leads to disgruntled customers. An interesting pronouncement is that if an Islamic bank is involved in repeated violations of Shari'a, the customers are inclined to switch their banks. Nonetheless, the findings reveal that Shari'a compliance is not the only satisfaction yardstick for Islamic banks' customers; they also expect their banks to be convenient, technologically advanced and provide security of their capital. Practical implications – The paper has profound implications for Islamic financial institutions operating in Pakistan. Although Shari'a compliance is the most important factor that Islamic banks need to observe, they also need to be competitive with conventional banks. Originality/value – The paper is a unique contribution to Islamic banks' selection criteria where the importance of Shari'a compliance and conventional bank patronage factors has been explored. The paper's has practical implications for Islamic banks' owners and regulators.

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    Article provided by Emerald Group Publishing in its journal International Journal of Islamic and Middle Eastern Finance and Management.

    Volume (Year): 4 (2011)
    Issue (Month): 2 (June)
    Pages: 131-145

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    Handle: RePEc:eme:imefpp:v:4:y:2011:i:2:p:131-145
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    1. George G. Kaufman, 1967. "Customers view bank markets and services: a survey of Elkhart, Indiana," Staff Studies 37, Board of Governors of the Federal Reserve System (U.S.).
    2. Javalgi, Rajshekhar G. & Armacost, Robert L. & Hosseini, Jamshid C., 1989. "Using the analytic hierarchy process for bank management: Analysis of consumer bank selection decisions," Journal of Business Research, Elsevier, vol. 19(1), pages 33-49, August.
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