The Impact Of Customer Awareness And Bank Selection Standards On Customer Loyalty In Islamic Banking In Pakistan
Department of Management Sciences
Iqra University Gulshan Campus
The purpose of this study is to analyze the awareness in customers about Islamic banking system and their bank selection criteria. Islamic banking industry in Pakistan is growing with a fast rate. Despite of this growth rate, the Islamic banking industry is still facing some challenges and constraints that demand to be maintained this growth rate. For conducting this study three hundred questionnaires were randomly disseminated among customers in three selected Islamic banks in Karachi, Pakistan. Furthermore, Islamic banking knowledge and bank selection criteria were considered as independent variables for this study. However, SPSS version 16 software was used to examine the data. A Chi square, One-way ANOVA and Association tests were used to measure the affect of two proposed independent variables on customer loyalty in Islamic banking. Keywords: Loyalty in Islamic banking, Islamic banking knowledge and Bank selection criteria.
The foundation of Islamic banking is not recent in Pakistan, but their growth has not been rapid as compare to conventional banking. In Pakistan, there are two types of parallel banking system i.e. conventional banking and Islamic banking. Even though, customers’ loyalty has many attributes. To elaborate further, Abbasi et al. (2012) stated that “a customer’s commitment with dealing in Islamic banking is measured by customer’s loyalty towards this type of banking. Customer’s loyalty has many dimensions regarding Islamic banking” (p. 102). However, the focus of this study is to analyze the impact of customer knowledge about Islamic banking and their criteria of selecting banks on customers’ loyalty in Islamic banking. As every bank has an ultimate purpose is to maximize profit and growth. Therefore, it is important for Islamic banks to know the loyalty in their customers and its attributes as well. In this regards, this study is expected to measure the loyalty in Islamic banking and its attributes are mentioned in theoretical framework. To understand Islamic banking system first we have to understand the word “Islamic”. What do we mean when we say Islamic? Islamic means according to Islam. When we say according to Islam we mean in conformity with Shariah. Again the same comes to us, what is Shariah? Shariah is a set of rules and laws set out by religion. Shariah is not only a religious law as it supersedes law in its inclusion substance and forms both. It deals with social and economic problems both. It gives concept of another world that comes after this world – the Day of Judgment. So, Shariah is “a system consisting of laws and rules for religious, political, social, domestic and private aspects of life of individuals and groups”. Therefore, every individual is responsible for balancing between all these aspects in manners required and guided by Shariah. The rules and guidelines of Shariah are: “Commandments of Allah (SWT) revealed by Him upon His messenger Holy Prophet (SAW) as: * Recited Wahee – the Holy Quraan and
* Un-recited Wahee – the Sunnah
Therefore, the sources of Shariah are simply very clear and easy to understand. Source of law means “a definite means for extracting principles and guidelines”. There are two types of sources of Shariah: * Primary Sources (including Quraan and Sunnah)
* Secondary / Derived Sources (including Ijmaa and Qiyaas) Furthermore, whenever a rule is declared “Islamic” it will be either derived from Quraan, Sunnah, Ijmaa or Qiyaas. Every rule need not be extracted from Quraan or Hadees only. Therefore, Islamic banking and its all details are not extracted from Quraan or Sunnah only. This system is based use of all sources of Shariah.
1.2 Review of the Related Literature
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