CHAPTER 1INTRODUCTION1.1 IntroductionThe Islamic banking as one of the most important segments of the Islamic finance industry. The development of Islamic finance has been widely associated with the rapid growth of Islamic banking operations worldwide over the past four decades.
Islamic banking has the same purpose and operation as conventional banking. However, Islamic banking refers to a system activities that operates must follow the shariah teaching and satisfy the customer need and demand. The purpose of this research is to study the relationship between perceived tangible, reliability, assurance, sincerity, personalization and formality and customer satisfaction in Islamic banks. Everyone can used the service offered by the Islamic banks either Muslims or non- Muslims. It is because there is no specification that Islamic banks is only for Muslims. In banking operation for those who wish to have good customer service and transparency of contracts which is all the detail will be disclosed and fair practices and can meet customer satisfaction are in Islamic banks. The Islamic banks services are consist of ATM Debit cards, Internet Banking, cheque books and many more are all available.
1.2 Background StudyNowadays, we have been familiar with the Islamic banking services that provide by the banks who operates their business do not involves any element contrary with the Islamic teaching. Islamic Bank is financial institution that operates with the objective to offer financial services that are shariah compliance and to establish socio economic justices and equitable in the distribution of wealth and income and also disclose all the detail to the customer. In order to meet customer satisfaction they are competing in a highly competitive environment for the provision of quality services.It is reported that customers of Islamic banks have a greater perception of service quality as compared to customers of conventional banks (Ahmad et al.,2010).
Now banks, customers are much concerned regarding the quality of services due to increased customer satisfaction and demand from customers. The customers will continuously use their current bank if they feel satisfy with the services provided by the banks, otherwise they feel no doubtful to use other banks services. Islamic banks should concentrate on giving services quality in order to increase customer satisfaction and as the evident that service quality has a positive impact toward customer satisfaction (Ahmad et al.
, 2010)The quality of service plays an important role in each services related to industry. These are used by marketer in order to satisfy their customers, so that highly quality services can be delivered (Imrie, 2013). The existence and expanded of service sectors around the world, marketing researchers have asserted to focus on service quality to generate favourable marketing outcomes and important to gain satisfaction and loyalty from customers (Ladhari et al., 2011). It is true especially in case of Islamic banking industry where Islamic banks are struggling to meet customer expectations of service quality (Taap et al.
, 2011) it is because banks are deal with customers and people, so it is related with the bank industry.The Islamic financial service organizations across Asia are facing serious marketing challenges such as diverse customer base with varied expectations and higher competition among Islamic banks to attract and retain customers (Kamarulzaman and Madun, 2013). So that it is shoe the services quality are play an important roles in order to meet customer satisfaction as well as increase the Islamic banking industry to the top level of the best performance on provide services to the customer.1.3 Problem statementIn Malaysia, the Islamic banking service is one of the key contributing factors to the increase in the national GDP.
According to Islamic financial services group, BIMB Holdings Bhd’s earnings rise 11% around RM619.84 Million in 2017. Besides that, about 15% customer of Islamic banking are non-Muslim.
It is shows Islamic banks are attractive and competitive financial rates to the customer. This indicates clearly that Islamic banks are not only for Muslims people. (Rasyid ; Abdul, 2015). Service quality is one of the factor to compete in the banking industry. So that it is important to maintain the best service for customersHowever, there are several studies founded that the service quality offered by the Islamic banks has some challenges. According to Fahmy and Yusof (2016), some Malaysians claim that Islamic banking is just a change in name of conventional banking as they argue that the interest rate under conventional banking is just converted to the profit rate in Islamic banking only. As refer to the research of Halim and Hamid (2011), the marketing effort provided by Islamic banking and financial institutions to their clients is still inefficient.
Compared to conventional banks, Islamic banks involve only minimum effort to marketing their products and services.According to the customer service portal in the Islamic banking site in 2018, Among 183 respondents who have lodged complaints with the participating banks in the last three months about 47.5% considered customer complaints there are so many complaint about the staff in the Islamic banks being rude and bad services provided to the customers. Based on the customer statement that the staff are unprofessional and unfriendly while answering customer’s questions. In addition the Islamic bank does not have any employees near the ticketing place for the guide customer for the guide on how to open the account and documents and the details that need to be brought. Such attitude may lead to bad reputation and impression about the Islamic banks as well as shows that Muslim people are unmannered because mostly Islamic banks staff are Muslim.
In order to maintain the high standard of transparency and financial service quality to the customer, the Association of Banks in Malaysia (ABM) and the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), collaborated with Bank Negara Malaysia (the Bank) to publish an enhanced Customer Service Charter and conduct a Customer Satisfaction Index survey on banking services in 2017. This is one initiative to maintain the best service quality in the banking system.1.4 Research Question What is the relationship between tangible and the customer satisfaction? What is the relationship between reliability and customer satisfaction?What is the relationship between assurance and customer satisfaction? What is the relationship between sincerity and customer satisfaction?What is the relationship between personalization and customer satisfaction?What is the relationship between formality and customer satisfaction?1.
5 Research Objective To measure the relationship between tangible and the customer satisfaction.To measure the relationship between reliability and customer satisfaction.To measure the relationship between assurance and customer satisfactionTo measure the relationship between sincerity and customer satisfaction.To measure the relationship between personalization and customer satisfaction.To measure the relationship between formality and customer satisfaction.1.
6 significance of studyThe significance of the study is to know the customer perception in the service quality in the banking services it is because to increase trust and maintain the best services provided by the bank. From that can improved the quality of services as well as can fulfil the customer satisfaction and make it our services are different from other company.When customer satisfied with the services offer by the bank it will increase the customer loyalty towards the Islamic banks as well as show that Islamic bank are the best and have a grate quality of services.
Besides that it will reduce problem arise, we need to manage the problem professionally it make the works become easy and lead to the best performance.1.7 Scope of studyThis research has been doing from August until November 2018. It is to know what is customer perception that encourage and persuade them continuously used the services provide by the Islamic Banks. The reason why is because banks are deal with customer and according to Islamic financial services group, BIMB Holdings Bhd’s earnings rise 11% around RM619.84 Million in 2017. Besides that, about 15% customer of Islamic banking are non-Muslim.
Other than that there are so many complaint from customer on the website about the services and staff. So that we want to study what is the customer perception of services quality in Islamic banks that fulfil customer satisfaction. In addition, this study focuses on people in Selangor who use the services that offered by the Islamic banks due to 28 branches which is the highest of Islamic banks has been operate in Selangor. 1.8 Limitation of the studyThis research, there are several limitations that have set up that includes all customers perception of service quality that can satisfied customers satisfaction in Islamic Banks.1.8.
1 Lack of expertise Due to the lack of conducting a research before, so the researcher has to make an effort by gaining information and knowledge from several of previous research document. It is a quite difficult to collect the information as not many people make a research about customers perception of service quality that can satisfied customers satisfaction in Islamic Banks.1.8.2 Time Constraints Researcher has limited time to complete the research and duties as a student at the same time doing practical, so it will make me take time to complete this research.
The researcher has to manage properly their time in doing the research. It may also affect the population area of doing research when there is limited time that resulting less respondent and data.1.9 definition of the key termsAssurance: the meaning of assurance is the staff and employees are knowledgeable, courteous, inspiring, and trustworthy it is to ensure the customer will get accurate information.Reliability: the meaning of reliability is the ability of the bank on providing a service accurately to the customer from time to time.Tangibles: it is about the appearance of the bank, staff or employees, furniture, and other related materials that can attract customers.Sincerity: it is happen during the staff or employee deliver the service personally to the customer are “genuine” and original while providing the service.
Formality: which means the staff keep the social distance and perform well on cultural rituals to show respect to the customer.Personalization: the staff focus and give full attention to the customer individually and the service must highly customized.CHAPTER 2LITERATURE REVIEW2.0 Introduction In this chapter illustrate the literature review on the topic and also the variable.
In addition there is also conceptual framework discussed in this chapter.2.1 Perception of Service Quality The successful and achievement of service quality will be the advantage to the firm or company in the long term, for example the higher level of customer satisfaction as well as will lead to increase the customer loyalty from time to time.
Services quality play an important role in order to ensure the customer satisfy with the services offered by the Islamic banks it is because customers who are patrons of the best product and services. Consequently, efficient tools to assess service quality are invaluable to companies who earn their revenues in part from delivery of service. Recently, the most widespread service quality tool is SERVQUAL (Landrum, et al., 2009).These dimension scale constitute to develop a service quality measurement scale named SERVQUAL. This scale have been use widely by service marketing researcher in USA and European countries, and the operational are efficiency and comprehensive. It has already been used by many services marketing researcher in the banking sector and basically the item of SERVQUAL are strongly and positively contribute towards the customer satisfaction.
Charles and Kumar (2014) have employed SERVQUAL to investigate service quality of Malaysian banks but the focus of analysis was on quantification rather than improving the state of service quality. In a recent study, Katwalo and Muhanji (2014) found that traditional SERVQUL dimensions are important for the customers in search of value during service transactions. The researchers, Mursaleen et al. (2014) also employed SERVQUAL to investigate service quality of media channels but also suggested to employ culturally sensitive scales to measure service quality. 2.2 Customer SatisfactionCustomer satisfaction is defined as a measure of how organisations meet or fulfil customers’ expectations from the services provided. It show the customers’ perception towards services provided by the organisation and is achievable by enhancing services and product offerings with service delivery systems that meet or exceed customers’ expectations and needs.
Customer perception will help the organization making improvement on their service if do not fulfil customer satisfaction. The leading outcomes of customer satisfaction will leads to customers’ loyalty and promotion of the organisation to family and friends, which will fuel the organisation’s growth. Customer satisfaction leads to customer loyalty with the service provided which is referred to the positive respond and good behaviour in the service to market the Islamic banks provide the best services (Amin et al., 2013). According to Baumann et al.
(2011), loyalty is an attitude as well as a specific behaviour. The customer loyalty is important to make the customer will continually use the product and services by repurchase a particular product or service and it will create positive impact in the organization (Amin et al., 2013).
The loyal customers will always use the service more often than others and also spread positive word-of-mouth about the bank’s service offers (Amin et al., 2013). So that, it can be concluded that service quality is an effective tool to keep customers satisfaction and lead to customer loyalty to the bank. Once the customers are satisfied with the service offered, they will generate and spread positive word-of-mouth about the bank, will spend more, and they won’t easy to change their mind to go for other bank services. The customer will stick to the bank if they feel satisfied with the service provided such as the staff are sincere advice and are treating them individually.2.
3 Assurance Assurance is about how the bank employees communicate and deal with customer either verbal or written so the communication skill are highly needed in this situation to build confident in front customer. Besides It also includes good manners, attitudes, politeness and knowledge of employees (Owen and Othman, 2001). According to (Qureshi et al.,2014). Service quality in Islamic banking is influenced and effected by a good level of assurance.
Therefore, in order to give the best service quality it is requires the employees to be polite with customers, competent, work on providing suitable financial advice and have easy access to customer account information. In addition, customer satisfaction and confidence in Islamic banking may be developed by the banks’ credibility (Ashraf, 2014). 2.
4 Reliability Reliability is to achieve the best service quality in an accurate way for instant providing fast and secured transactions so that customer are not waiting so long to settle their matter, for secured transaction the staff are protect the information of the customer which is private and confidential, and a wide range of products and services offered to the customer that can attract more customer used Islamic banks and open more counters at peak time to avoid from crowded in the bank. Armstrong and Seng (2000) stated that the speed and quickly of transaction is the most important item effected and influencing customer satisfaction. Reliability is found to be one of the major service quality determinants in the Islamic banking (Qureshi et al., 2014). Reliability help an Islamic bank to be more efficient and positively reflects on the level of customer satisfaction.
2.5 Tangible Tangibility is about the apparent of the Islamic banks it is includes the convenience given to the customer such as the location must be strategies, design of physical facilities, materials and use of communication equipment. It refers to tangible factors of service delivery such as ease of accessibility to building or utilities in the building, which is it will attract more customer from the good facility provided to the customer and the way in which the required information and descriptive materials for the service delivery are presented (Sureshchander et al., 2002). Al Shemmery (2010) mentioned that the indoor aspects of the branch (e.g. speed of the service, privacy, opening hours and ATM availability) assess the overall customer satisfaction in the retail banking.
Service quality works well in Islamic banking when is supported by the element of tangibility (Qureshi et al., 2014). Al-Tamimi and Al-Amiri (2003) stated that tangibles are very important in Islamic banking which leads to customer satisfaction. 2.6 Sincerity Sincerity in the banks is about the employees interact and dealing with customers sincerely.
Which is the staff being honest and genuine to the customer for example they keep on motivated to work hard to show top class work results, and concern toward the customers in the same sincere manner. To give real service, you must add something which cannot be bought or measured with money, and that is integrity and sincerity. (Douglas Adams, 2017). Sincerity in customer service is also emphasize on taking care on consideration, genuineness, and respect for customers. It is to ensure customer feel appreciated while dealing business in Islamic banks. All these attributes would portray the good culture and values of Islamic banks, other than that it will help to gain or maintain customer satisfaction as well as create the customer loyalty.
In addition, serve the customer sincerely will create good reputation on the Islamic banks and the customer will spread from mouth to mouth to other about the best services provided by the Islamic banks. (Amin et al., 2013).
2.7 Formality Formality which means the staff keep the social distance and perform well on cultural rituals by using proper language and not being rude and respect to the customer. Usually in the banking services we practice and apply the concept of being formal to the customer and be kindly and polite as well as the staff and employees give full attention to the customer and they will look like corporate person. It is also will help to promote the positive sign and to ensure that the staff and customer are understand each other during their conversation as well as the staff are more easier to perform the best service to the customer.2.8 Personalization Personalization in the banking services the staff focus and give full attention to the customer individually and the service must highly customized.
The need for personalization in the banking services are become more pronounce because nowadays customer are very demanding and the need to put customers first in any situation. For instant the staff or employee try to provide any solution to solve customer’s problem that will less burden on the customer, other than that the staff always show respect by calling the name of customer as a sign respect toward customer to make them feel appreciated by referring to the customer using a title such as Mr, Ms, Dr, Sgt, and others or his/her last name or maybe use his/her first name if you get permission to use it.2.9 Conceptual Framework.AssuranceReliabilityTangibilitySincerityFormalityPersonalizationCUSTOMER SATISFACTIONAssuranceReliabilityTangibilitySincerityFormalityPersonalizationCUSTOMER SATISFACTIONFigure 1: Conceptual Framework customer perception of service quality in Islamic banksFigure above shows the relationship between Tangible, reliability, assurance, sincerity, personalization and formality and customer satisfaction in Islamic banks among people in Selangor.
The independent variables of the study are tangible, reliability, assurance, sincerity, personalization and formality while customer satisfaction in Islamic banks is the dependent variable.3.0 Summary In a nut shell, the previous study showed the positive relationship between the independent variable and the dependent variable (customer satisfaction).
So that there is a reason to know which of the customer perception that are highly influence the customer in order to fulfil their satisfaction in the banking services.CHAPTER THREERESEARCH METHODOLOGY3.1 IntroductionIn this chapter discussed the sampling method used, from where data is collected, questionnaire design, variables involve, research design and hypothesis statements.
3.2 Sampling3.2.1 Sample SizeIn this study, the researcher will use 100 respondents as the sample size. The researcher also refers the previous study which customer perceived service quality and loyalty in Islamic bank to decide the number of respondents. The previous study used 300 respondents who used the Islamic bank services and the validity result is reliable.3.
2.2 Sample TechniqueIn this research, need a technique that suitable for this research proposal which is the simple random sampling method in order to achieve the objectives. Every element in the population has a known and equal chance of being selected as a subject.
3.3 Data Collection3.3.
1 Primary DataPrimary data will obtain from the individuals. The researcher will randomly distributed questionnaires to the respondents with the range age of 17 years old to 55. The questionnaires will be distributed personally to the respondents by face to face and another method the questionnaire will be distributed in the form of Google Doc through Whatapps or Telegram either personally or share in the group. The questionnaires will be distributed to 100 respondents.
3.3.2 Secondary DataIn this study, secondary data will be collected from external sources it is because can be found easily and quickly as well as more compared to primary data. The secondary data are the statistic of the Islamic bank asset in Malaysian from BNM and publish by the New Strait Times journal 2017.3.4 Questionnaire DesignThe questionnaire that is used for his study is divided into eight sections.
The first section comprised of demographical questions. Respondents will be asked about age, gender, and occupation. The nominal scale is used for this section. Second section consists of first independent variable which is tangible, will be continue until seven section with the next independent variable which is reliability, assurance, sincerity, personalization and formality. For the eight section questions for dependent variable which is customer satisfaction. Started from the second section the researcher use the likert-scale to examine the customer perception of the service quality provided by Islamic bank that can satisfied them.
3.5 VariablesIn this study, the independent variables consist of consumer’s perception of the services quality in Islamic bank, while the dependent variable consists of customer satisfaction.3.6 Research Design3.6.1 Purpose of the StudyThe purpose of this study is to indicate customer’s perception of service quality in Islamic banks in Selangor.
Furthermore, this study will determine customer satisfaction based on the services offered by the Islamic Banks in Selangor. The customers satisfaction that will be analysed in this study are by customers perception of tangible, reliability, assurance, sincerity, personalization and formality in the banking services.3.6.2 Types of InvestigationThe type of investigation used in this study is causal approach where it explains that the customers perception after using the services by the Islamic Banks offered to the customers. 3.6.
3 Extent of Researcher InterferenceThe factor that we research is minimal extent of researcher interference which studying event that is normally occurs. Nowadays many people used the services by the Islamic banks and the quality services are important to gain more customers and portray the good performance of Islamic banks. From this research there are problems arise in the Islamic banking sectors, which is the BIMB state the increment on their profit by 11%, so that it is show many people are used the services offered by the Islamic banks, but there is some complain on the customer service and what is customers perception of services quality and satisfaction in the Islamic banks.3.
6.4 Study SettingThe study setting the researcher used non- contrived to establish cause and effect relationship using the same natural environment in which employees normally function by giving questionnaire to the customers of Islamic banks and people who live in Selangor. 3.6.5 Unit of Analysis For the unit of analysis the population to be study are based on the individual. The main factor that we are doing this research are to know the perception of the customers that used the Islamic banks service among people who live in Selangor and the range age around 17 to 55 years old. So the unit of analysis that used is individual to collect data.
3.6.6 Time HorizonFor the time horizon for this study will be cross sectional. This is because the data will be gathered just once and it will probably take more than a day which is from July 2018 to Nov 2017 to collect data. Data will be obtained from customer used the services provide by the Islamic Banks and people who live in Selangor. Using cross –sectional design only one sample of respondent from the target population and data collection by give questionnaire to customers and people who live in Selangor in order to determine the customer’s perception of service quality and satisfaction in Islamic banks.
3.7 Hypothesis statement H1. Tangibility strongly and positively contributes towards customer satisfaction.H2. Reliability strongly and positively contributes towards customer satisfaction.H3.
Assurance strongly and positively contributes towards customer satisfaction.H4. Sincerity strongly and positively contributes towards customer satisfaction.H5.
Personalization strongly and positively contributes towards customer satisfaction.H6. Formality strongly and positively contributes towards customer satisfaction.
3.8 Research MethodologyIn this study, this target respondent is Muslims consumers who are used the services offer by the Islamic bank. The questionnaires will distribute to the consumers with the range of age 17 years old to 55 years old.
The sample of size is done via a simple random sampling technique. The total of respondent is 100 respondents. This figure is considered adequate for statistical analysis. The questionnaire is designed in eight sections.
The first section comprised of demographical questions. Respondents will be asked about age, gender, and occupation. The nominal scale is used for this section.
Second section consists of first independent variable which is tangible, will be continue until seven section with the next independent variable which is reliability, assurance, sincerity, personalization and formality. For the eight section questions for dependent variable which is customer satisfaction. Started from the second section the researcher use the likert-scale to examine the customer perception of the service quality provided by Islamic bank that can satisfied them. All the items were presented by linkert-scale extending from 1 (strongly disagree) to 5 (strongly agree). Completed data will be analyzing using statistical methods such as descriptive analysis, correlation analysis and regression analysis via the Statistical Package for Social Sciences (SPSS) for Windows version 22.
Descriptive analysis is used to describe, examine and summarize the main features of collected data quantitatively. Correlation analysis is used to measure the strength of relationship between the dependent and independent variables. Regression analysis is used to measure the percentage dependent variable can be explained by the independent variable. This analysis is used to determine the perception of service quality provided by the Islamic bank and customer satisfaction.