Afro Eurasian Studies, Vol. 2, Issues 1&2, Spring & Fall 2013, 56-71
Measuring the Perceived Service Quality
and Customer Satisfaction in Islamic Bank
Windows in Libya Based on Structural
Equation Modelling (SEM)
Ali Joma Khafafa*
The growth of the banking sector is vital for a country’s economic development as it provides most of the financing sources for businesses. Customer satisfaction is one of the most important factors in determining the feasibility of a banking operation. Thus, this study aims to measure customer satisfaction in Libyan commercial banks, using the structural equation model (SEM). This study uses the dimensions from the modified SERVQUAL
model, namely Tangibility, Assurance, Reliability, Responsiveness and Empathy for 366 cross-sectional samples that were taken
from three commercial banks in Libya, namely Gumhouria Bank, Wahda Bank and Sahara Bank in year 2012. The study found that responsiveness was the strongest indicator of customer satisfaction using the dimensions of perceived quality, followed by reliability, empathy and assurance. The results of this study will be useful for policy-making by Libyan authorities responsible for the development of the banking sector.
Keywords: Customer Satisfaction, Perceived Service Quality,
Structural Equation modeling (SEM)
PhD Research Scholar, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800, Nilai, Negeri Sembilan, Malaysia; Email: email@example.com **
Director, Islamic Finance and Wealth Management Institute (IFWMI), Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia;
Customers are the lifeblood of any organisation, because customer satisfaction is the key to the continued survival of an organisation. Service quality is the key to measuring user satisfaction. Satisfaction is particularly important in relation to organisations that deliver services, rather than goods (Nicholls et al., 1998). The onset of competition from private players and foreign banks and the initiation of banking reforms since the early (1990s?) have led to an increased emphasis on the efficiency of customer service. Moreover, in the tough competitive arena in which these banks operate today, maintaining the quality of service is a pre–requisite for survival. Therefore, the measurement of service quality has increasingly created an interest among service providers (banks) and scholars (Sharma and Mehta, 2005). Hence, measuring the customer satisfaction and the quality of services provided to customers by banks is one of the topics that carry high importance in the field of management area, particularly in dealing with business organisations that value quality services. While Islamic banks are considered to attract individual customers mainly due to their religious orientation, with the increasing number of Islamic banks and Islamic windows, other factors such as quality may play a role in determining customer patronage and satisfaction. For this reason, there is a growing volume of literature available in the case of Islamic banks as well (see: Abdullah and Kassim, 2009; Abdullrahim, 2010; Almossawi, 2001; Al-Tamimim et al., 2003; Amin and Isa, 2008; Erol and El-Bdour, 1989; Gait and Worthington, 2008; Metawa and Almossawi, 1998; Al Zaabi, 2006; Othman and Owen, 2002a; Othman and Owen, 2002b). As for the case study on Libya, as it was known until the revolution, Libya had not had any significant presence of Islamic banking and finance. The Central Bank of Libya started initiatives to develop Islamic banking practices in Libya with the publication of its guideline numbered A. R. N. M. No. (9) in 2009 that granted approval for commercial banks to start in the development and delivery of Islamic- banking products. Many commercial banks such as the Jamahiriya Bank as the biggest bank in Libya, the Wahda Bank, the North African Bank and...
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