THE INFLUENCE OF SERVICE QUALITY TOWARD CUSTOMER...

THE INFLUENCE OF SERVICE QUALITY TOWARD

CUSTOMER SATISFACTION

(Case Study of Mandiri Syariah Bank)

Thesis

Submitted to Faculty of Economics and Businesses

To meet the Requirements in Achieving Degree of Bachelor of Economics

Submitted By:

Audita Arfanda NIM: 605082000027

INTERNATIONAL CLASS PROGRAM MANAGEMENT DEPARTMENT

FACULTY OF ECONOMICS AND SOCIAL SCIENCES UNIVERSITAS ISLAM NEGERI SYARIF HIDAYATULLAH

JAKARTA 1431 H / 2010 M




Thesis



Submitted by:


Under Supervison of

Academic Supervisor I Academic Supervisor II

i

Prof. Dr. Ahmad Rodoni Arief Mufraini, LC, M.si NIP: 19690203200112.1.003 NIP: 197701222003121001



JAKARTA 1431 H / 2010 M

Today, we administered a comphresive examination to Audita Arfanda, ID

605082000027. The title of his thesis is “The Influence of Service Quality Toward

Customer Satisfaction (Case Study of Mandiri Syariah Bank)”. After proper examination,

we have decided that he has met all of the requirements for the title of Bachelor of

Economics on the field of Management, State Islamic University Syarif Hidayatullah

Jakarta.

Jakarta, June 29th, 2009

Comprehensive Examination Team

Examiner I Examiner II

ii

Prof. Dr. Abdul Hamid, MS Prof. Dr. Ahmad Rodoni NIP: 19570617198503.1.002 NIP: 19690203200112.1.003

Examiner III

Arief Mufraini, LC, M.Si NIP: 197701222003121001




Thesis



Submitted by:


Under Supervison of

Academic Supervisor I

Prof. Dr. Ahmad Rodoni NIP. 19690203200112.1.003

Academic Supervisor II

M. Arief Mufraini, Lc., M.Si NIP. 197701222003121001

Expert Examiner I

Prof. Dr. Abdul Hamid, MS NIP. 19570617198503.1.002

Expert Examiner II

Cut Erika Ananda Fatimah, SE., MBA



JAKARTA 1431 H / 2010 M

iii

iv

AUTO BIOGRAPHY

1. PERSONAL INFORMATION

Name : Audita Arfanda

Place/Date of Birth : Bekasi, September 13rd , 1987

Religion : Islam

Nationality : Indonesia

Address : Jl. Sejahtera No. 39 RT/RT 03/003

Kel/Kec Jatiwaringin, Pondok Gede, Jawa Barat, 17411

Phone Number : 021 8487438

E-mail : [email protected]

2. FORMAL EDUCATION

1993 - 1999 : Assyafiiyah Elementary School,Jatiwaringin, West Java

1999 - 2002 : Putra I Junior High School, Kalimalang, East Jakarta

2002 - 2005 : Dwiwarna Boarding School, Parung, Bogor

2005 - 2010 : Faculty of Economics and Business, Major in Management

State Islamic University Syarif Hidayatullah Jakarta

2007 - 2009 : College of Business, Bachelor of International Business

Management, Dual Degree Programme, Universiti Utara

Malaysia (UUM)

2009 - Present : College of Business, Master of Human Resource Management

Universiti Utara Malaysia (UUM)

mailto:[email protected]

v

3. INFORMAL EDUCATION

2006 - 2007 : Brevet A & B Tax Accounting, FISIP, University of Indonesia

2009 : Entrepreneurship Skill, College of Business,

Universiti Utara Malaysia

2010 : Occupational Safety & Health Management System

ISO 18001:2007, University of Indonesia

vi

ABSTRAK Penelitian ini dilakukan untuk menganalisis pengaruh service quality terhadap

customer satisfaction diindustri perbankan syariah. Penggunaan model SERVQUAL terdiri dari enam dimensi : tangibles, responsiveness, assurance, dan empathy dengan menambahkan dimensi compliance untuk mengukur service quality di bank. Responden penelitian sebesar 120 nasabah yang memiliki rekening dibank syariah. Responden penelitian adalah nasabah yang memiliki rekening bank syariah dan memiliki rekening konvensional. Analisis data yang digunakan dalam penelitian ini uji instrument yang terdiri dari uji validitas dan reliabilitas. Untuk pengujian hipotesis menggunakan metode regresi sederhana untuk menganalisis enam dimensi : tangibles, responsiveness, assurance, dan empathy dengan menambahkan dimensi compliance untuk melihat pengaruhnya terhadap service quality di bank. Hasil penelitian secara keseluruhan menunjukkan bahwa secara keseluruhan dimensi dari service quality berpengaruh terhadap customer satisfaction.

Kata Kunci : Kualitas Jasa, Kepuasan Konsumen, Perbankan, Islam

vii

ABSTRACT

This study attempts to examine the relationship between service quality perception and customers’ satisfaction in Indonesian Islamic banking This model starts with SERVQUAL measurement scales consisting of six dimensional structures: tangibles, reliability, responsiveness, assurance, and empathy, and plus the compliance dimensions to measure Indonesian Islamic banking service quality.Respondents are from 120 customers who visit the bank counters. They must have an account with one of the full-fledged Islamic banking and dual-banking systems. The results showed that the majority of the Islamic banking customers were satisfied with the overall service quality provided by their banks. The data analysis used instrument test consists of validity and reliability test. For the hypothesis testing used simple regression tests to analyzed six dimensional structures: tangibles, reliability, responsiveness, assurance, and empathy, and plus the compliance dimensions toward service quality. The findings suggest that the standard model of Islamic banking service quality dimensions should consist of the six dimensions and good determinants of satisfaction. The relationship between service quality and customer satisfaction was significant.

Keywords : Customer services quality, Customer satisfaction, Banking, Islam.

viii

PREFACE

Bismillahirrohmanirrohim

By praising Thank Heavens to Allah that showered divine guidance, the hidayah and

inayah so writer can finish the task of Thesis that be entitle “The Influence of Service

Quality Toward Customer Satisfaction (Case Study of Mandiri Syariah Bank)”.

Shalawat and greetings it is hoped was showered to Rasulullah SAW as well as the

family, the friends but also anyone who followed the steps and his guidance.

In an effort to this Thesis there are many obstacles and the barriers as well as the

difficulty that the writer faced. To face this difficulty, the writer received much good help of

morale and material that are so valuable, the guidance and facilities that really were needed.

Especially to my parents that never tired gave the affection and their support took the form of

the prayer, morale and material to the writer towards the compilation of this Thesis.

In making this thesis, the writer was not alone but I was supported and taught by many

parties. In this opportunity, the writer would like to say my huge thankful to:

1. Prof. Ahmad Rodoni as the Thesis Supervisor 1 and as the Assistant Dean of

Academic Faculty of Economics and Business, State Islamic University Syarif

Hidayatullah Jakarta, that sincerely gave time to give the guidance that were useful

for the compilation of this Thesis.

2. Arief Mufraini, LC, M.SI as the Thesis Supervisor 2 and as the Technical

Coordinator of International Faculty of Economic and Business, State Islamic

University Syarif Hidayatullah Jakarta that sincerely gave time to give the

guidance that was useful for the compilation of this Thesis.

ix

3. Prof. Abdul Hamid MS as a Dean of Faculty of Economic and Business, State

Islamic University, Jakarta.

4. My lecturer who often performed an educational service the writer with various

science sorts while joining lectures as well as the staff Faculty of Economic and

Business, State of Islamic University Syarif Hidayatullah Jakarta.

5. My lovely parents, Dr. Adi S. Widjojo, MM, MBA and Mrs Untari Susilowati who

gave the support and become the source of the motivation, was most main

valuable. I realize that I could be nothing without their prayer to Allah SWT,

especially to my mother for her time every midnight, doing prayer to his children

and my family in general.

6. My brother and sister, Advan Adrianda and Armita Athennia who helped both

from the aspect of morale and material in this thesis process.

7. My cousins, Mas Eri Wirandana and Mas Jay zay. Thanks for the times and energy

to accompany and assist the writer to finish this thesis.

At the end, the writer Expects for any critics as well as suggestions that could improve

the content of this thesis. Hopefully this thesis could be worthwhile for all of us. Amien.

Thank you.

Wassalamualaikum Warrahmatullahi Wabarrokatuh.

Jakarta, October 2010

Audita Arfanda

x

TABLE OF CONTENTS

Page of Thesis Approval ............................................................................. i Page of Comprehension Test ...................................................................... ii Page of Thesis Comprehension Test .......................................................... iii Auto Biography ............................................................................................ iv Abstrak .......................................................................................................... vi Abstract ......................................................................................................... vii Preface ........................................................................................................... viii Table of Contents ......................................................................................... x List of Table .................................................................................................. xii List of Figure ................................................................................................. xiv List of Appendix ........................................................................................... xv

Chapter I INTRODUCTION

A. Background ............................................................................................ 1

B. Problem Formulation ............................................................................. 5

C. Research Objective and Purpose ............................................................ 6

Chapter II LITERATURE REVIEW

A. Islamic Banking ....................................................................................... 7

B. Service Quality Concept ........................................................................ 15

C. Service Quality Attributes of Retail Banking ........................................ 17

D. Customer Satisfaction ............................................................................ 21

E. The Effect of Satisfied and Dissatisfied Customer ................................ 23

F. Measuring Customer Satisfaction .......................................................... 25

G. Customer Satisfaction Measurement Advantages .................................. 27

H. Consideration Framework ...................................................................... 29

I. Hypothesis .............................................................................................. 31

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Chapter III RESEARCH METHOD

A. Research Scope ...................................................................................... 33

B. Sampling Method ................................................................................... 34

C. Population Research ............................................................................... 34

D. Data Collection Method ......................................................................... 35

E. Analysis Method .................................................................................... 35

E.1 Validity Analysis ............................................................................. 36

E.2 Reliability ........................................................................................ 37

F. Operationalization Variable ................................................................... 37

Chapter IV ANALYSIS

A. Responden Characteristics ..................................................................... 41

B. Instrument Test ....................................................................................... 46

C. Descriptive Statistics .............................................................................. 52

D. Hypothesis Testing ................................................................................. 66

Chapter V CONCLUCION AND IMPLICATION

A. Conclusion .............................................................................................. 69

B. Implication ............................................................................................. 69

C. Limitation ............................................................................................... 70

D. Recommendation .................................................................................... 71

REFERENCES ............................................................................................ 72

APPENDIX .................................................................................................. 75

xii

LIST OF TABLES

Table 3.1 Service Quality Operationalization Variable ....................... ...... 39

Table 3.2 Customer Satisfaction Operationalization Variable ............. ...... 40

Table 4.1 Respondent’s Characteristics According to Gender ..................... 41

Table 4.2 Respondent’s Characteristics According to Age ........................... 42

Table 4.3 Respondent’s Characteristics According to Education ................. 43

Table 4.4 Respondent’s Characteristics According to Occupation ............... 44

Table 4.5 Respondent’s Characteristics According to Income ..................... 45

Table 4.6 Validity Test of Tangible .............................................................. 47

Table 4.7 Validity Test of Reliability ............................................................ 47

Table 4.8 Validity Test of Responsiveness ................................................... 48

Table 4.9 Validity Test of Assurance ............................................................ 48

Table 4.10 Validity Test of Empathy ............................................................ 49

Table 4.11 Validity Test of Compliance ....................................................... 50

Table 4.12 Validity Test of Customer Satisfaction ....................................... 50

Table 4.13 Reliability Test ........................................................................... 52

Table 4.14 Descriptive Statistic of Tangible, Reliability, Responsiveness,

Assurance, Empathy, Compliance, and Customer Satisfaction .................... 53

Tabel 4.15 Descriptive Statistic Tangible ..................................................... 55

Tabel 4.16 Descriptive Statistic Reliability ................................................... 57

Tabel 4.17 Descriptive Statistic Responsiveness ........................................... 59

Tabel 4.18 Descriptive Statistic Assurance ................................................... 60

Tabel 4.19 Descriptive Statistic Empathy ..................................................... 62

Tabel 4.20 Descriptive Statistic Compliance ................................................ 64

xiii

Table 4.21 Hyphothesis Testing .................................................................... 66

xiv

LIST OF FIGURE

Figure 2.1 ................................................................................................... 8

xv

LIST OF APPENDIX

Number Explanation Page

1 Questionnaire…………………………………….. 75

2 Validity Test ……………………………………… 83

3 Reliability Test …………………………………… 87

4 Descriptive Statistic Test ………………………… 88

4 Result of Linear Regression …………………….. 90

CHAPTER I

INTRODUCTION

A. Background

Islamic banking is a popular topic in Muslim countries. Islamic

banking has been established in more than 100 countries, with an

estimated $300 billion in assets that are increasing by 15 percent a year,

according to the Asian Banker (2005) a financial-services consultancy. In

Malaysia, where 60 percent of the population is Muslim, both Islamic

banks and conventional banks operate side by side (Karim and Affif,

2005).

In the last five years, the Islamic banks development in Indonesia

is phenomenal. The number of banks increased from only five banks ( two

Islamic Commercial Banks and three Islamic Banking Unit) in 2000 to 18

banks ( three Islamic Commercial Banks and 15 Islamic Banking Unit) by

the end of 2004. Assets grow by an average of 70% per year in the last five

years, namely from Rp 1,790 trillion to Rp 14,035 trillion by the end of

2004. Fund collected by the Islamic banks in Indonesia has reached Rp

10,559 trillion, while financing channelled by the Islamic banks reached

Rp 10,978 trillion, creating a finance to deposit ratio of 104,00 %. Another

important development of Islamic banks in Indonesia is the number of

branch and sub-branch offices. In 2000, the number of branch offices was

only 28, while in 2004 it has grown to 148.1 this does not include the

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number of ATM (Automatic Teller Machines) that can be accessed by

Islamic bank customers ( Karim and Affif, 2005).

In 2005, the numbers of Islamic banks still increase significantly.

Following this growth is the increase of number of branch offices, sub-

branch offices, ATM, assets, and of course customers. Unfortunately,

studies’ regarding customers’ behavior of the Islamic banking customers

in Indonesia is still rare. Questions regarding: what is the public perception

of Islamic banks, why customers choose an Islamic bank for its financial

need, why customers choose a certain bank, why customers prefer a

certain Islamic bank, and what is customer’s knowledge on Islamic bank

products are so important but currently not fully understood yet. This lack

of consumer knowledge then creates the dilemma of Islamic banking in

Indonesia.

Service quality has become a main interest in the industrial world

especially in the service industries. The key to success in winning the

global competition now and in the future is to have high quality service.

High quality of service is believed to influence over customer value and

customer satisfaction. (Heskett et.al., 2007). Therefore, the importance of

service quality, value, and customer satisfaction seems justified to the

survival of service companies, including the banking companies. Many

empirical studies in various sectors of service industry such as banking,

hotel, insurance; long distance calls companies, workshops, car rental, and

2

other financial companies have been conducted to find out the factors that

determine service quality.

Service quality has always been the main study for retail banking

(Sureshchandar et.al., 2002) in today's very competitive environment in

which a lot of banks are available for customers to choose from. However,

we need to study further the factors that enable banks to attract and

maintain their customers. Banks seeking strong competitiveness in the

future need to develop new ideas to foster good relationships with their

retain customers.

The significant growth of banks has caused the appearance what is

called "buyer's market" in which the supply exceeds the demand. In this

condition, the customers are in strong bargaining position and therefore the

banks have to be more effective in providing services because customers

now have many choices in determining the bank they want. The customers'

need for excellent service keeps changing. The level of service quality

varies from time to time.

There is no guarantee that what is excellent service today is also

applicable for tomorrow. There is also the rapid change of the retail-

banking sector in the last 15 years with the increased application of the

technology in the service delivery. To win the battle of global competition

in the service industries and be able to survive, banks will need to use new

strategies in providing service that will satisfy their customers. This is the

3

reason why service marketing and bank marketing in particular keeps

developing and it is gaining the prominence in the marketing literature.

The interest in service marketing research on service quality and

customer satisfaction has grown recently. Hundred of studies have been

conducted by applying related theories and methods in the service

industry, especially in retail banking industry. Angur et al. (1999) tested

SERVQUAL and SERVPERF frameworks in the retail banking industry.

Avkiran (1994) has also proposed an instrument for measuring the quality

of banks' branches. Similarly, Bahia and Nantel (2000), Sureschandar and

colleagues (2002) developed a reliable and valid scale for measuring the

quality of retail banking services.

However, there are continuing demands for refining the theories

that are suitable to retail banking setting. One way to refine a theory is to

consider variables within the existing model that are potentially powerful

in predicting the dependent variable. For this reason, after Caruana (2002)

examined his model that links service quality to service loyalty via

customer satisfaction, he suggested the need to consider the role of

customer value and company image/reputation within the model.

Likewise, Cronin and his colleagues (2000) who assessed the

effects of quality, value and customer satisfaction on behavioral intentions

across multiple services industries (excluding banking industry) suggested

the need to include additional decision-making variables such as the

tangible quality of service products, the quality of service environment

4

(i.e. the servicescape), and customers' expectations. They also suggested

the need to conduct replication in another area.

This study attempts to examine the relationship between service

quality perception and customer’s satisfaction in Indonesian Islamic

banking by adapting and modifying SERVQUAL and CARTER scales

(Othman and Owen, 2002). This research is important in line with the

obvious cross-cultural and religious differences between these two key

customer segments. In the Indonesian context, there is a strategic

dimension that needs to be understood. The dichotomy between

conventional and Islamic Bank has traditionally been an invisible frontier

between ethnic groups in light of the role of religion in Indonesia. The

widespread use of Islamic banking by non-Muslim customers may indicate

that this invisible barrier can be crossed. That would bode well for the

Indonesian Government’s effort to promote national unity.

B. Problem Formulation

Business competition is much stretched force all bank or service company

to have business strategy in running business. Related in these things, so

the problem will be researches are:

Is there significant influence between service quality toward

customer satisfaction?

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C. Research Objective and Purposes

1. Objective

The objective of this research is :

To analyze the influence of service quality toward customer

satisfaction

2. Usefulness of Research

a. For the researcher, to increase knowledge, especially

knowledge about the activity consumer in service quality

attribute and customer satisfaction. Also as the form of the

implementation on the theory and knowledge those were

received in the studying process.

b. For the student and the academic, as the addition of the

scientific reading material to become one of the sources of

knowledge towards the subject consumer behavior,

especially concerning the application consumer preference.

c. For Banking Industry

To be consider on improving the service quality of islamic

bank to develop and maintain customer satisfaction.

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CHAPTER 2

Literature Review

This chapter presents the theoretical foundation, based on the literature

pertinent to the current research, by first reviewing the Islamic Banking concepts,

service quality concepts, followed by a critique of SERVQUAL, service quality

attributes, and service quality attributes of retail banking industry. Next, a review

of literature related to perceived value, and customer satisfaction is presented.

This is followed by a review of research conducted on customer satisfaction -

service quality relationship. Finally, the chapter will conclude with a presentation

of the contributions of this research to the service marketing literature, and the

presentation about the loyalty and the effect of service quality attributes on

customer satisfaction.

A. Islamic Banking

Islamic banking operates under Islamic commercial law, or fiqh-al-

muamalat, which deals with contracts and the legal ramifications of contracts.

Contracts may be categorized as valid, invalid, or void. The contract is the basis of

Islamic business and is the measure of a transaction’s validity. A contract also

means an engagement or agreement between two persons in a legally accepted,

meaningful, and binding manner.

Aqad is the Arabic term for contract and means a tie or a knot that binds

two parties together. The word aqad is also used in the sense of confirming an

7

oath. In legal terminology, aqad refers to a contract between two parties on a

particular matter, which is to be concluded upon the offer and the acceptance of

the parties concerned (Billah 2006).

The various forms of commercial contracts in Islam can be identified in

the Quran and in the jurisprudence of ancient and modern Islamic scholars. In

Islamic banking, contracts play an important role in ensuring transparency and

structuring transactions so that conformity with Islamic law is maintained. In

Islamic law, rules are prescribed for specific contracts as illustrated in Figure 2.1.

Contract of Exchange. The sales contract (bai contract) is the primary contract of

exchange in Islamic commercial law. It involves the transfer of ownership of a

lawful commodity for a fixed price or for another commodity (barter trade).

Figure 2.1. Key Types of Islamic Contracts in Islamic Banking

Source : Adawiah (2007)

Sales contracts are used extensively in Islamic banking and include the following:

• Murabahah contract (cost-plus-markup contract) involves the sale of

lawful goods at a price that includes an agreed-upon profit margin for the

8

bank (seller). It is mandatory for the bank to declare to the customer the

cost and profit. Payment can be, depending on the agreement between the

parties, spot or deferred.

• Bai’ bithaman ajil contract (deferred-payment sale) is a sale of goods on a

deferred-payment basis. The bank purchases an asset and sells it to the

customer at cost plus a profit margin agreed to by both parties. The bank is

not required to disclose the price and profit margin. Payments can be

monthly, quarterly, or semiannually.

• Bai’ salam contract (forward contract) refers to an agreement whereby

payment is made in advance for delivery of specified goods in the future.

The underlying asset does not exist at the time of the sale. This type of

contract is used in agricultural financing. Funds are advanced to farmers

who deliver their harvested crops to the bank to sell in the market.

• Bai’ istisna contract (supplier contract) is an agreement in which the price

of an asset is paid in advance but the asset is manufactured or otherwise

produced and delivered at a later date. This type of contract is typically

used in the manufacturing and construction sectors.

• Bai’ istijrar contract (also a type of supplier contract) refers to an

agreement between a purchaser and a supplier whereby the supplier agrees

to deliver a specified product on a periodic schedule at an agreed-upon

price rather than an agreed-upon mode of payment by the purchaser.

• Bai’ inah contract (sale and buyback contract) involves the sale and

buyback of an asset. The seller sells the asset on a cash basis, but the

9

purchaser buys back the asset at a price higher than the cash price on a

deferred basis. This type of contract is primarily used in Malaysia for cash

financing; it is also used for Islamic credit cards.

Contract of Usufruct. Usufruct contracts govern the legal right to use and profit

or benefit from property that belongs to another person. The key usufruct

contracts in practice in Islamic banking are the following:

• Ijarah (leasing) refers to an arrangement in which a bank (the lessor)

leases equipment, a building, or other facilities to a client (the lessee) at an

agreedupon rental fee and for a specified duration. Ownership of the

equipment remains in the hands of the lessor.

• Al-ijarah thumma al-bai (leasing and subsequent purchase) is a type of

ijarah contract in combination with a bai (purchase) contract. Under the

terms of the ijarah (leasing) contract, the lessee leases the goods from the

owner, or lessor, at an agreed-upon rental fee for a specified period of

time. Upon expiry of the leasing period, the lessee enters into the bai

contract to purchase the goods from the lessor at an agreed-upon price.

This concept is similar to a hire/purchase contract or closed-end leasing as

practiced by conventional banks.

• Ijarah muntahia bittamleek (buyback leasing) involves an ijarah (leasing)

contract that includes a guarantee by the lessor to transfer the ownership in

the leased property to the lessee, either at the end of the term of the ijarah

period or by stages during the term of the contract.

10

Gratuitous Contracts. A gratuitous contract is entered into for a benevolent

purpose, such as for making a charitable donation. The following are the

gratuitous contracts currently used by Islamic banks:

• Hibah refers to a gift awarded by a bank without any commensurate

exchange. For example, a bank gives hibah to a savings account holder as

a token of appreciation for keeping money in the account.

• Qard involves an interest-free loan that is extended as good will or on a

benevolent basis. The borrower is required to repay only the principal

amount of the loan. The borrower may choose to pay an extra amount,

however, as a token of appreciation for the lender. No extra payment over

the principal amount can be charged by the bank; any such extra charge is

considered riba (charged interest), which is prohibited under Islamic law.

These loans are intended for individual clients in financial distress.

• Ibra occurs when a bank withdraws its right to collect payment from a

borrower. The computation of ibra, a rebate, is based on the terms and

conditions set forth in the governing contract.

Participation Contracts. Shari’a, in order to promote risk-andreward sharing

consistent with the principles of Islam, encourages wealth creation from

partnership arrangements that are governed by the following types of participation

contracts:

• Mudharabah (trust financing) is a partnership between a bank and a

customer in which the bank provides the capital for a project and the

11

customer or entrepreneur uses his or her expertise to manage the

investment. Profits arising from the investment are shared between the

bank and the entrepreneur on the basis of an agreed-upon profit-sharing

ratio. If the project results in a loss, it is borne solely by the bank.

• Musyarakah (partnership financing) refers to an investment partnership in

which all partners share in a project’s profits on the basis of a specified

ratio but losses are shared in proportion to the amount of capital invested.

All parties to the contract are entitled to participate in the management of

the investment, but they are not required to do so. A musyarakah

mutanaqisah (diminishing partnership) is an agreement in which the

customer (the partner of the bank) eventually becomes the complete and

sole owner of the investment for which the bank has provided the funds.

The profits generated by the investment are distributed to the bank on the

basis of its share of the profits and also a predetermined portion of the

customer’s profits. The payment of this portion of the customer’s share of

profits results in reducing the bank’s ownership in the investment.

• Musaqat, a form of musyarakah, refers to an arrangement between a

farmer, or garden owner, and a worker who agrees to water the garden and

perform other chores in support of a bountiful harvest. The harvest is

shared among all parties according to their respective contributions.

12

Supporting Contracts. The supporting contracts used in Islamic banking include

the following:

• Kafalah contract (guaranteed contract) refers to a contract in which the

contracting party or any third party guarantees the performance of the

contract terms by the contracting party.

• Rahnu (collateralized financing) is an arrangement whereby a valuable

asset is placed as collateral for payment of an obligation. If the debtor fails

to make the payments specified in the contract, the creditor can dispose of

the asset to settle the debt. Any surplus after the settlement of the sale is

returned to the owner of the asset.

• Hiwalah (remittance) involves a transfer of funds/debt from the

depositor’s/ debtor’s account to the receiver’s/creditor’s account; a

commission may be charged for the service. This contract is used for

settling international accounts by book transfers. It obviates, to a large

extent, the necessity of a physical transfer of cash. Examples are a bill of

exchange and a promissory note.

• Wakalah (nominating another person to act) deals with a situation in which

a representative is appointed to undertake transactions on another person’s

behalf, usually for a fee.

• Wadiah contract (safekeeping contract) refers to a deposit of goods or

funds with a person who is not the owner for safekeeping purposes. This

type of contract is used for savings and current accounts in Islamic banks.

Because wadiah is a trust, the depository institution (bank) becomes the

13

guarantor of the funds, thus guaranteeing repayment of the entire amount

of the deposit, or any part of it outstanding in the account of depositors,

when demanded. The depositors are not entitled to any share of the profits

earned on the funds deposited with the bank, but the bank may provide

hibah (a monetary gift) to the depositors as a token of appreciation for

keeping the money with the bank.

• Jualah contract (a unilateral contract for a task) is an agreement in which a

reward, such as a wage or a stipend, is promised for the accomplishment of

a specified task or service. In Islamic banking, this type of contract applies

to bank charges and commissions for services rendered by the bank.

Shari’a provides the foundation for modern Shari’a-compliant economic

and financial transactions. Thus, Shari’a supplies the philosophy and principles

underpinning Islamic banking products and services. Islamic banking, based on

Islamic law, is an integral part of the attempt to develop the Islamic ideal in social

and economic terms. The Islamic legal system possesses a certain flexibility that

provides for adaptation to new socioeconomic situations in that Islamic law deals

differently with permanent aspects of legal issues and changeable aspects of legal

issues. Islamic law allows room for reasoning and reinterpretation in areas of law

that are changeable and progressive in character. For example, riba (interest) is a

fixed prohibition whereas the ruling of permissibility for gharar (uncertainty)

takes into account a cost–benefit analysis. Hence, permissibility changes with

changing technology, the legal framework, customary practice, and so forth

(Shanmugam and Zahari, 2009).

14

B. Service Quality Concept

Quality is one of the dimensions that determine the satisfaction rating.

According to Kotler (2008:174) the quality is the totality of features and

characteristics of products or services that have the ability to satisfy the desires

expressed directly or indirectly. This means shows that the features determining

the quality of products or services which satisfy customer needs. Quality can be

detected by comparing consumer perception of service consisting of real services

that they receive the services they really hope for, where consumer perceptions of

consumers’ conclusions derived mainly from his experiences using the products

or services concerned.

Definition of quality services centered on efforts to meet the needs and

desires of customers and delivery accuracy to offset customers' expectations.

Understanding quality of service according to Wyckof in Lovelock, quoted by

Tjiptono (2006; 59) is the expected level of excellence and control over the level

of excellence to meet the customer. In other words there are two main factors that

affect the quality of services, namely Expected service and perceived service

(Parasuraman, et al., Cited by Tjiptono, 2006; 60).

If the services received or perceived as expected, then the perceived

service quality (perceived service) good and satisfactory. If the services received

exceed customer expectations, then the perceived service quality as an ideal

quality. Conversely, if the services received is lower than expected, then the

perceived poor quality of services. Thus good or bad quality of service depends on

the ability of service providers in meeting customer expectations consistently.

15

In subsequent developments, in Fitzsimmons et al Parasuraman, Zeithaml

and Bitner cited by Tjiptono (2006: 70) found that there are ten dimensions can be

summarized into just five main dimensions. The five principal dimensions

include: 1) direct evidence (tangibles), including physical facilities, equipment,

personnel, and means of communication. 2) Reliability (reliability), the ability to

provide the promised services quickly, accurately, and satisfying. 3)

Responsiveness (responsiveness), namely the desire of staff to assist customers

and provide service with a response. 4) Assurance (assurance), including the

knowledge, ability, courtesy, and trustworthiness are owned by the staff; free from

danger, risk, or doubt. 5) Empathy (empathy), including ease of doing

relationships, good communication, personal attention, and understand the needs

of its customers.

Formation of philosophy based on Islamic banking has not been described

above, so it is important to add dimension to the dimensions of service quality

compliance. Use of service quality dimensions (SERVQUAL) on Islamic banking

(Othman and Owen, 2002). With the aim to obtain an additional view of how

services will be improved, try to develop an alternative model, called by

CARTER. This discussion has been formed on the dimensions of service quality

compliance factor. The results obtained from this analysis that has been shown by

the CARTER model which is a dimensional variable consisting of six dimensions.

The results showed that customers of Islamic banking compliance using the

dimensions, because it is very important to follow the principle of Islamic banking

in Islamic law.

16

Previous research conducted by the Erol and El-Bdour (1989) in Amin and

Isa (2008) has explained that the religious factor has no role in selecting the

Islamic Bank in Jordan. In Malaysia, 40 percent of Muslims are encouraged to use

Islamic banking with the aim of a compliance factor (Haron et. Al, 1994 in Amin

and Isa, 2008). It was explained that the factor of compliance with the principles

of Islam shown an important role in Malaysia in determining the decision to select

the bank. Meanwhile, the orientation of an advantage over Singapore motivate

people to use the product and service of Islam and Muslims in Singapore further

assess the existence of Islamic banks compared to non-Muslim citizens in

Singapore (Gerrard and Cunningham, 1997 in Amin and Isa, 2008). Karatape et

al, 2005 in Amin and Isa (2008) revealed that the level of service quality measures

the development in one country that produces quality services in other cultures.

C. Service Quality Attributes of Retail Banking

In order to develop marketing strategy, service marketers, especially bank

marketers need to understand the service attributes that used by consumers in

selecting bank. For example, consumers would use bank reputation, bank

reliability, bank assurance, and physical facilities of the bank in selecting bank

services. If marketers can understand which attributes are used to evaluate a

service, they will be better able to manage and influence the customer's

evaluations and perception of the offering (Crane and Clarke, 2000).

Perceived quality of service tends to play an important role in high

involvement industries like banking services. Banks have traditionally placed a

17

high value on customer relationships with both commercial and retail customers.

In the last ten years, the nature of customer relationships in retail banking in

Indonesia has been changing, especially since the advent of automatic teller

machines. A survey that conducted by ISMS (2005) shows that 90% of retail

banking customers in Jakarta use both bank branches and ATMs in their

relationship with banks. Therefore, service quality may well be measured in terms

of both personal support and technical support.

The measurement of perceived service quality may remain a challenge.

Previous research suggested that the dimensionality of service quality might

depend on the type of services under study (Cronin and Taylor, 1992; Babakus

and Boller, 1992). Based on this background, studies have investigated various

attributes, which determine consumers' perception of service quality of retail

banking industry (Sureschandar et al., 2002).

A study of service quality in bank setting by Avkiran (1994) in Amin and

Isa (2008) was conducted to develop an instrument for measuring customer

service quality as perceived by bank branch customers. He designed and

examined six-dimension model for service quality in banking industry

(responsiveness, empathy, staff conduct, access, communication, and reliability)

with 27items.

The six dimensions conceptualized at the start with 27 items were

empirically reduced to 17 items across four discriminating factors. The

dimensions which emerged were staff conduct, credibility, communication, and

access to teller services. The exploratory study conducted by Stafford (1996)

18

reported the distinct elements (attributes) of bank service quality as perceived by

customers. Seven attributes were found in assessing bank service quality.

The first attribute, named "bank atmosphere"; included cleanliness, as

well as an overall positive and courteous attitude by employees (kindness,

friendliness, and pleasantness). The second attribute, 'relationship", indicates the

importance of a personal relationship with the bank employees, where customers

are recognized easily by long-term employee.

The third attribute, "rates and charges", indicates that low costs and high

interest rates can affect an individual's perception of bank service quality.

The fourth attributes, "available and convenient services", indicates a full

array of services that available, easily accessible and convenient. The fifth

attribute, "ATMs", indicates available, convenient, and working automatic teller

machines. The sixth attribute, "reliability/honesty", indicates the importance of a

solid bank rating and honest, reliable employee. The seventh attribute, "teller",

indicates adequate and accessible teller.

Bahia and Nantel (2000) conducted a study to develop a reliable and valid

scale for the measurement of the perceived service quality of retail banking in

Canada. They argued that the universality of the five dimensions of SERVQUAL

across different types of services had been questioned in a number of subsequent

studies (Amin and Isa, 2008). They also argued that these five dimensions are not

fully generic. As found by Carman (1990) in Amin and Isa (2008), it is often

necessary to incorporate additional items to dimensions because they are

particularly important for some service categories. Another critique addressed to

19

SERVQUAL since it has focused on the first marketing mix element (i.e. product)

to improve quality.

Further they developed a measurement of perceived service quality with

reference to Parasuraman et al in Amin and Isa (2008) original ten dimensions and

some additional items which are important to retail banking service, then they

purified and tested the measurement scale. Based on this procedure, they proposed

a scale that was called as bank service quality (BSQ).

The BSQ comprises 31 items, which span six dimensions: effectiveness

and assurance, access, price, tangibles, service portfolio, and reliability.

Sureschandar, Rajendran, and Anantharaman (2002) aspired to develop an

empirical model of service quality with a specific focus on the banking sector.

The objectives of their study are: (1) to identify the critical factors of service

quality from the customers' perspective; (2) to develop an instrument to measure

customer-perceived service quality based on the identified factors with a specific

focus on the banking sector; (3) to empirically test the proposed instrument for

unidimensionality, reliability and validity using a confirmatory factor analysis

approach. They proposed the 5 critical factors of service quality from the

customers' perspective i.e. human element of service delivery, core service or

service product, systematization of service delivery, tangibles of service

(servicescapes), and corporate social image. These factors resulted from

modifying the original SERVQUAL instrument, by adding and/or reducing other

relevant factors. The result of empirically tests for unidimensionality, reliability,

and validity show that all the five factors of customer perceived service quality

20

have strong evidence for unidimensionality, reliability, convergent discriminant,

and criterion-related validities.

D. Customer Satisfaction

The basic purpose of a business is able to create customer satisfaction,

because if the customer satisfaction can be created then this will bring some

benefits to customers and also business people. Among the relationship between

consumers and companies become harmonious, providing a good basis for re-

purchase, forming a recommendation by word of mouth and ultimately consumers

will become loyal to the company. General understanding of consumer

satisfaction or dissatisfaction is the result of the differences between consumer

expectations with performance that is perceived by the consumer.

Customer satisfaction is an output, resulting from the comparison of the

consumer after making a purchase from an expectation of performance with actual

performance and the emergence of cost (Churchill and Surprenant, 1982 in Aydin,

Özer and Orasil, 2005). The theory of customer satisfaction used in two different

ways of transaction and general (Yi, 1991 in Aydin, Özer and Orasil, 2005). The

concept of special transactions associated with customer satisfaction as a form of

judgments made after a specific purchase goal. Customer satisfaction refers to the

assessment of overall consumer to a brand, based on attendance and experience

(Johnson and Fornell, 1991 in Aydin, Özer and Orasil, 2005). In fact, all forms of

satisfaction is seen as a function of the entire satisfaction of certain transactions

(Jones and Suh, 2000 in Aydin, Özer and Orasil, 2005).

21

Customer satisfaction as a whole represent all forms of evaluation which is

based on the total purchases and consumer experiences with products or services

within a given time. Is where the satisfaction of the special transaction will

provide a diagnostic information about a particular product or service delivery, a

whole satisfaction is more a measurement of a base of experience with companies

in the past, present and future performance (Anderson, 1994 in Aydin, Özer and

Orasil, 2005). This is because the consumers’ conducts repurchase evaluations

and decisions based on the purchase and consumption of existing experience, not

only on a particular transaction or episode (Johnson, et al, 2001, p. 219 in Aydin,

Özer and Orasil, 2005).

Customer satisfaction is very dependent on the views and expectations of

the consumer or the consumer itself. Needs and desires are perceived by

consumers when purchasing a product or service, past experience when using the

product or service, as well as the experiences of colleagues, friends, or relatives

who have used these products or services, and also advertising, can said to be the

factors that can provide a very important influence on the views and expectations

of consumers when buying a product or service. Of the several explanations that

exist about the customer satisfaction that has been researched and defined by

experts marketing, it can be concluded that customer satisfaction is a response to

consumer behavior that can be viewed in full purchasing evaluation form to a

product or service that he felt (product performance) compared with consumers.

From the above definition can be concluded that customer satisfaction is a feeling

22

of pleasure or disappointment resulting from comparing one product display in

relation to expectations.

E. The Effect of Satisfied and Dissatisfied Customer

Many company often neglected the customer satisfaction, their orientation

is only to sell as many products and services as they can, in order to get higher

profit. In fact, good customer satisfaction has an effect on the profitability of

nearly every business.

Gitomer (1998) in Meng & Elliot (2009, p.59) stated the cost of gaining a

new customer is ten times greater than the costs of keeping a satisfied customer.

Irawan (2002, p.9) believes that satisfied customers are a good mouth to

mouth recommendation and promotion, while unsatisfied customers will spread

their bad experiences to others.

To illustrate the situation, when customer receive good service and

satisfied with the company, each will typically tell nine to ten people, but if they

are not satisfied, they will also tell their bad experiences to fifteen to twenty

people. For that reason, we can not afford to let our customers dissatisfied and tell

to other. However, once customers have been delighted, their expectations are

raised. They will be dissatisfied if the service levels return to the previous level

and it will definitely take more effort to delight them in the future.

Customer expectations are influenced by several factors (Zeithaml, Bitner, &

Gremler (2009):

23

1. Informal recommendations.

Word of mouth communications, customers tend to have a higher

expectation of a specific that has been recommended to them by family or

friends.

2. Formal recommendations

Recommendations of agents found in certain publications

3. Personal need.

Each customer has different needs for each service. Therefore, this need

also influences customers to judge the quality of the service, and whether

or not it has satisfied their needs.

4. Past experience.

Customers with different past experiences with that specific service type

seem to have different expectations of the service.

5. Price.

The price to be paid for a service determines, in the customer’s mind, the

level of quality to be demanded.

6. All elements of promotional mix.

These elements convey a message to the customer that has an influence on

expectation.

7. Good corporate image.

It is very important asset because it positively shapes the expectations of

the customers.

24

8. External communication.

The influence of messages sent out by service providers plays an important

role on customer expectations. Customers will expect the service to be in

keeping with the messages.

F. Measuring Customer Satisfaction

After discussing about customer satisfaction, the next question arise is, how to

measure the customer satisfaction? Kotler (2008, p.41) discuss several ways to

measure customers’ satisfaction:

1. Complaint and Suggestion System

The organization makes it easy for its customers to deliver suggestions and

complaints. The media is suggestion boxes, comment cards or toll free

telephone.

2. Customer Satisfaction Survey

Responsive companies obtain a direct measure of customer satisfaction by

conducting periodic surveys. They send questionnaires or make telephone

calls to random sample of their recent customers or make telephone calls

to a random sample of their customer to find out their feel about various

aspects of the company’s performance. Customer Satisfaction Survey is

divided into 4 categories:

a. Directly Reported Satisfaction

The respondents are being asked directly with questions in order to

know if they are very satisfied, satisfied, enough, dissatisfied, or very

25

dissatisfied. This survey is used to collect the customer opinion and

needs which can give the result called the customer satisfaction index.

This customer satisfaction index is the standard that the company

needs to maintain.

b. Derived Dissatisfaction

The questions that being asked included in two aspects, how high is the

customer expectation in the certain attribute, and how high is

performance that customer’s feel of this attribute.

c. Problem Analysis

Respondents are being asked to describe two things; the problems

which related with the company offers and the suggestion for

improvement.

d. Importance-Performance Analysis

The respondent is asked to rate the services according to the customer

importance and company performance in each attributes.

3. Ghost shopping

This method is to hire person to pose as potential buyers to report their

finding on strong and weak points they experienced in buying the

company’s and competitors’ products

4. Lost Customer Analysis

Companies contact customers who have stopped buying or who have

switched to another suppliers to learn why this happened. Much of this interest

has centered on the controversy generated by their service quality gaps model

26

Parasuraman (1985) in Kottler (2008), and particularly the SERVQUAL

instrument developed to measure service quality (Parasuraman et al., 1988) in

Chowdhary & Prakash (2007).

G. Customer Satisfaction Measurement Advantages

There are several advantages of measuring customer satisfaction (Blankenship, et

al. 2008, p.308).

• Customer satisfaction results can help to present the current standing of

customer satisfaction.

This utilization often goes beyond reporting statistical data such as mean,

range, and standards deviation. These descriptive data can assist in

identifying specific strengths and weakness in satisfaction dimensions, the

specific items under each, as well as information about overall scores.

However, different types of data analysis can be used to identify not only

aggregate but also individual information. From here emerge the distinct

patterns or gaps between different individuals, groups, or among particular

items.

• Customer satisfaction results can help to identify important customer

requirements. Identification of the specific customer requirements for

achieving satisfaction is useful at a very fundamental level. An organization

is able to clearly focus efforts in those areas that are most important to the

customer. Distinguishing those requirements most valued by customers

allows for pinpointing efforts for service modifications as well as further data

27

collection. Comparisons of specific items to the satisfaction dimension or

overall score can assist in determination of those items that are more closely

linked with satisfaction.

• Customer satisfaction results can help to monitor customer satisfaction results

over time.

Quite simply, the same information gathered at different points in time can

assist in identification of trends and patterns that develop as an organization

evolves and changes. Furthermore, this can be helpful in demonstrating the

levels of effectiveness of interventions, services and so forth at particular

points in history. What may work during a certain point in time may not at

another? This temporal collections and comparison of information allows for

an organization to adapt and modify services and products to meet the

changing requirements of its customers.

• Customer satisfaction results can help to provide comparisons to other

organizations.

Comparisons either within an organization by department or sub-group as

well as with outside agencies can provide a wealth of information. This

includes not only structural and organizational strengths and weaknesses, but

also effectiveness of service components and service delivery. This can assist

in coordination of planned changes specific to each area, as opposed to

general, “blanket” approaches. Also, this can give a perspective of how one

organization is performing in relation to others, namely one’s competition.

28

This gives the customer the information necessary to make informed choices

and selections.

• Customer satisfaction results can help to determine the effectiveness of

business practices.

Data gathered from customer satisfaction studies can provide valuable and

accurate information that can assist in evaluation of service components and

delivery. Services can be altered to become more effective, and business

practices can be altered to meet the standards of excellence within a certain

business. In essence this is the comparison of a particular item against a

standard predetermined by the customer. Those scores above the standard are

positive, while those below are in need of improvement. This enables more

thoughtful and considered prioritization of any possible plans of action. The

message is clear: customer satisfaction is essential for the success and

continued success of any business. Not only does positive customer

satisfaction help business, but also a lack of satisfaction takes an even bigger

toll on the bottom line. For a company to remain solvent, information

regarding customer satisfaction must be adequately collected and analyzed.

H. Consideration Framework

SERVQUAL dimensions are variable in the study revealed the level of

customer satisfaction and reliability dimension having the highest impact at all

levels of customer satisfaction assessment (Arasly et al, 2005 in Amin and Isa,

2008). The discussion is based on the disclosure there is a strong influence

29

between SERVQUAL and customer satisfaction (Othman and Owen, 2001 in

Amin and Isa, 2008). Service quality or service quality which consists of tangible,

reliability, responsiveness, assurance, empathy, and compliance has a close

relationship with customer satisfaction. Quality provides an incentive to

customers to establish strong ties with the company. In the long-term

commitments as this allows the company to thoroughly understand customers'

expectations and their needs. Thus, companies can increase customer satisfaction

where the company maximizes its customers an enjoyable experience and

minimizing or eliminating the customer experience less enjoyable. In turn,

customer satisfactions to create customer loyalty to companies that provide

satisfactory quality.

Likewise in the banking sector, which must be undertaken by a bank, is to

provide a quality service. This service forms one of which is chargeable to

employees who meet directly with customers is more intense because transactions

conducted over the many and varied. If the elements of services provided for

employees of Bank Syariah make our customers comfortable and in accordance

with what was expected by the client before, then the customer is satisfied with

the services provided. Likewise, if customers feel the service performance of

Bank employees more than what was expected previously, the customer was very

satisfied, therefore the quality of services provided by the Bank Syariah influence

on customer satisfaction levels. With good service quality expected a strong

relationship existed between the Bank Syariah with its customers. Thus the bank

can increase the satisfaction of its customers who in turn can create customer

30

satisfaction (customer satisfaction) to the bank that has been providing quality

service.

Figure 2

Theoretical Framework

Customer Satisfaction

Service Quality

Tangible Reliability

Responsiveness Assurance Empathy

Compliance

I. Hypothesis

Previous research has identified various factors that determine the level of

customer satisfaction. Bank of Greece in Turkey using the quality of services to

achieve the level of customer satisfaction. Dimension of SERVQUAL is a

variable in the study revealed the level of customer satisfaction and reliability

dimension having the highest impact at all levels of customer satisfaction

assessment (Arasly et al, 2005). The discussion is based on the disclosure there is

a strong influence between SERVQUAL and customer satisfaction (Othman and

Owen, 2001).

Results from previous research conducted by Amin and Isa (2008) using a

sample of students at Bahrain, indicating that younger customers revealed several

factors, such as a bank's reputation, bank employees are friendly, the location of

affordable, possess 24-hour ATM, and the availability of a vast parking lot in

31

choosing a bank (Almossawi, 2001). Bank's ability to deliver the benefits of an

influence of toward bank customer satisfaction level has an innovative method of

customer satisfaction levels, such as internet banking only, and the system via

Internet, telephone and call center. Based on the disclosure Leveque and

McDougall (1996), satisfaction and competitive rivalry of the bank are two

important factors that are usually used to influence all levels of satisfaction from a

customer.

Robust formation of the importance of service quality perception and

influence between service quality and customer satisfaction led researchers and

academics describe the level of customer satisfaction as factors related to the level

of previous studies of service quality and others that reveal the level of service

quality as a factor in shaping the level of previous research, customer satisfaction

(Amin and Isa, 2008).

The conceptual model is demonstrated and tested as Figure 2. This model

starts with SERVQUAL measurement scale, consisting of six dimensional

structures: tangibles, reliability, responsiveness, assurance, and empathy, and

compliance dimensions to measure Indonesian Islamic banking service quality.

Furthermore, a conceptual model of the relationship between service quality and

customer satisfaction (Figure 2) is developed based on the literature and

hypotheses are explored. The hypotheses research is:

H1: There is significant influence between service quality toward customer

satisfaction

32

CHAPTER III

RESEARCH METHOD

The research design that will be use in this research is causal research, which

explains about the causal relationship between research variables, the purposes to

make a decision of relationship methods cause and effect from independent

variables to dependent variables. On problem that discussed on chapter 1 about is

there any influence of service quality customer satisfaction in Islamic Bank?

Because of that research method is needed to answer those problem formulation

based on the hypothesis that already discussed on chapter 2.

A. Research Scope

This research attempts to examine the effect of service

dimensions/attributes on perceive service quality, and customer

satisfaction based on the research questions which presented as follows:

1. Using a retail-banking services setting in Jakarta, what are the

specific service

2. quality attributes that influence service quality.

3. Using a retail-banking services setting in Jakarta, what are the

specific predictors (service quality attributes, customer value, or

customer satisfaction) will influence customer satisfaction.

33

B. Sampling Method

The focus of this research is on the relationship between service quality

attributes and customer satisfaction as dependent variables. As mentioned before,

this research sample used non probability sampling. Not all the content or element

of population have the same opportunity to become sample.

The purposive judgmental sampling was used where the collection of

specialized informed respondent about Islamic bank (Sekaran, 2003).

Respondents are the customers who visit the bank counters and have an account

with one of the full-fledged Islamic banking.

C. Population Research

Data were gathered from personal interviews using questionnaire as a

measurement tool, and it was conducted in Jakarta by 5 trained interviewers

during two-month period in May until June 2010. The first part of the

questionnaire focuses on customer perceptions of service quality attributes, which

are the independent variables of this research. The second and third focus on

customer satisfaction, which are dependent independent variables of this research.

The third part of the questionnaire collects demographic data, such as gender,

marital status, age, education, and occupation, and other information such as the

length to be a customer of this bank, and how frequently do they have relationship

with the bank. In determinining sample size, Sekaran (2003) proposes that sample

34

size larger than 30 and less than 500 are appropriate for most research. The

questionnaires distributed are 150 questionnaires in which the questionnaires are

returned and can be used total of 120 questionnaires.

D. Data Collection Methods

This research method did on May 2010 use collection and observation

data, data is collected from Mandiri Syariah, Jakarta, there are:

1. Primary Data : Data is getting from the survey result with giving

questioner to the respondent that suitable with the population characteristic

of customer Mandiri Syariah. The sample of respondent was drawn from

Pondok Kelapa Branch, Saharjo Branch, Rawamangun Branch, Meruya

Branch and M.H Thamrin Branch of BSM.

2. Secondary Data : the general data is getting from the last research and

literature about relationship influence services quality towards customer

satisfaction

E. Analysis Method

This research method using the analysis method is the descriptive method.

The purpose is to get some figure of descriptive or systematic outline, actual,

accurate about the fact, also the phenomenon relationship that will be researched

and explore.

The analysis method that will be use in this research to measure the

customer satisfaction with the service quality is single regressions. The

35

independent variable (X) in this research is the service quality of Islamic Bank.

The variables that are used to measure the service quality is 6 dimensions of

service quality: Reliability, Responsiveness, Assurance, Empathy, Tangible and

Compliance. The dependent variable (Y) is customers’ satisfaction with Mandiri

Syariah throughout the experiences that they had. If the service quality provided is

the same or exceed the customers’ expectation, the customers will be satisfied,

and vice versa.

All indicators of the variables used in this research are illustrated in the following

equation:

Y = βo + β1 X1 + ε

Where:

Y : Customers’ satisfaction level

βo : Y intercept

β1 : slope of Y with variables X1 (Service Quality)

ε : random error in Y

E.1. Validity Analysis

Validity is the degree to which a measure accurately represents what it is

opposed to (Hair, 2006). According to Nunnaly (1994), there are three type of

validity that can be assessed: content validity, predictive validity, and construct

validity. Content validity is the assessment of the correspondence between the

individual items and the concept (Hair, 2006). The current study addressed

content validity through the review of literature as presented in Chapter II, and

36

adapting instruments used in previous research. Predictive validity was not

assessed in the current study. Construct validity of the three constructs (service

quality attributes, customer value, and customer loyalty) in this study was

evaluated by employing exploratory factor analysis using SPSS Release 15.

E.2. Reliability

There are several measures can be ascertained to establish the reliability of

the instrument, such as test-retest method, equivalent forms, split-halves method

and internal consistency method. Since all constructs in the model contain

multiple items, except the customer satisfaction construct, the internal consistency

method should be applied. It is estimated using Cronbach alpha with the

acceptable cut off point of 0.70 (Nunnaly, 1994) for demonstrating that all

attributes are internally consistent. With regard to validity and reliability analysis,

the following is the description of the results for each constructs.

F. Operationalization of Variables

The five dimensions of SERVQUAL as proposed by Parasuraman et al. (1988),

Othman and Owen (2001, 2002) and Jabnoun and Al-Tamimi (2003) were

adapted and modified in this study. The modifications consisted of substituting

questionnaire items particularly suited to a specific service industry (Islamic

banking) and context (Malaysia). The original items were translated and modified

into Indonesia language. The wording reflected the local Islamic context. A seven-

37

point Likert scale was used to measure the perception of perceived quality which

ranged from “1 strongly disagree” to “7 strongly agree”. To avoid the issues of

conceptual and psychometric properties raised by Cronin and Taylor (1992) and

Babakus and Boller (1992) by using different scores, and to be more efficient the

researchers only had to measure perception of quality (Yavas et al., 2004).

In addition to the original SERVQUAL scale, relevant items from the

Islamic banking service quality scale (Othman and Owen, 2001; Jabnoun and Al-

Tamimi, 2003) were also adapted and incorporated. For example, compliance

items one, two, three, and four are items from compliance aspects of the Islamic

banking service quality scale (Othman and Owen, 2001). Subsequently, empathy

items one, two, and three from the empathy dimension of commercial bank

service quality were also incorporated in the current scale (Jabnoun and Al-

Tamimi, 2003).

Studies on customer satisfaction within the banking sector measured the

construct with multi-item measures (Fornell et al., 1996) that identified how

satisfied a customer felt with products and services provided by Islamic banking.

In addition, a seven-point scale ranging from “1 very un-satisfied” to “7 very

satisfied” was used to measure the customer perception and assessment to overall

satisfaction. Finally, demographic information and product knowledge of Islamic

banking customers were elicited from the respondents.

The variable in this study are Service Quality and Customer Satisfaction.

Quality Service consists of five dimensions of Parasuraman et. al, (1988), namely:

Tangible, Reliability, Responsiveness, Assurance, Empathy, and added a

38

dimension of Compliance by Othman and Owen (2001) as an additional

dimension of Islamic Banking.

Table 3.1

Service Quality Operationalization Variable (Independent) Variable Dimension Indicator Service Quality Tangible 1. Assessment of visually-

related services. 2. The speed and efficiency

of transactions visually. 3. Opening hours are

convenient and flexible.

Reliability 1. Bank Syariah store data accurately.

2. Bank employees provide services in accordance with the promised time.

3. When having problems, the Bank trying to solve the problem with good and cooperative.

4. Available products and services of the Bank that adequate.

5. Availability of facilities takaful products (insurance).

Responsiveness 1. Employees want to always help the customer.

2. The employees of the bank responsive to customer demand related to what was promised.

3. Services at the counter quickly and efficiently.

4. The Bank has many branches.

Assurance 1. Bank employees who work as staff were honest and friendly.

2. Bank employees have the appropriate knowledge and provide the necessary answers.

3. The Bank provides its customer’s data is confidential.

4. The Bank provides financial consulting.

39

Empathy 1. The availability of internet banking facilities.

2. The availability of ATM machines within easy reach.

3. Availability of 24-hour ATM services.

4. Availability of credit. 5. Bank employees may

attract your attention. 6. The Bank provides low

cost services.

Compliance 1. The lack of interest on any transaction conducted.

2. Availability of zakat payment facility (without the added tax).

3. Sharing of profits on investment products.

4. The lack of interest on the loan.

Source : Amin and Isa (2008)

Table 3.2

Customer Satisfaction Operationalization Variable (Dependent)

Variable Indicator

Customer Satisfaction 1. The lack of interest on any

transaction conducted.

2. Availability of zakat payment

facility (without the added tax).

3. Sharing of profits on investment

products.


Source : Amin and Isa (2008)

40

CHAPTER IV

ANALYSIS

In this chapter, the researcher will provide the descriptive statistics and hypothesis

testing according to the type of data and methods that have been explained in the

previous chapter.

A. Respondent Characteristic

Table 4.1

Respondent’s Characteristics According to Gender Source: questionnaire

Characteristic Frequency Percentage (%)

Gender : Male Female

45 75

38 62

Total 120 persons 100

41

From the table above, it can be concluded that the majority gender is female with

75 persons from a total of 120 respondents or 62 % from all respondents. While

the male gender is 45 persons from a total of 120 respondents or 38 % form all

respondents.

Table 4.2 Respondent’s Characteristics According to Age

Source: questionnaire


Age : <25 years old 25-35 years old 35-40 years old >40 years old

6 24 42 48

5 20 36 40


From the table above, it can be concluded that the majority age is >40 years old

with 48 persons from a total of 120 respondents or 40 % from all respondents.

While 35-40 years old has 42 persons from a total of 120 respondents or 36 %

42

form all respondents. Age 25-35 years old has 24 persons from a total of 120

respondents or 20 % from all respondents. Age <25 years old has 6 persons from a

total of 120 respondents or 5 % from all respondents.

Table 4.3 Respondent’s Characteristics According to Education



Education : <Diploma Bachelor Degree Post Graduate

30 42 48

25 35 40


From the table above, it can be concluded that the majority education is post

graduate with 48 persons from a total of 120 respondents or 40 % from all

respondents. While bachelor degree has 42 persons from a total of 120

respondents or 35 % form all respondents. Diploma education has 30 persons

from a total of 120 respondents or 25 % from all respondents

43

Table 4.4 Respondent’s Characteristics According to Occupation



Occupation : Government sector Private sector Entrepreneur College students

26 34 48 12

22 28 40 10


From the table above, it can be concluded that the majority occupation

entrepreneur with 48 persons from a total of 120 respondents or 40 % from all

respondents. While in private sector has 34 persons from a total of 120

respondents or 28 % form all respondents. Government sector has 26 persons

from a total of 120 respondents or 22 % from all respondents. College students

have 12 persons from a total of 120 respondents or 10 % from all respondents.

44

Table 4.5 Respondent’s Characteristics According to Income



Income : < 1 million 1 million – 2 million 2 million – 5 million >5 million

12 24 30

10 20 25 45

Total 120 person 100

From the table above, it can be concluded that the majority income is >5 million

with 54 persons from a total of 120 respondents or 45 % from all respondents.

While 2 million – 5 million has 30 persons from a total of 120 respondents or 25

% from all respondents. 1 million – 2 million has 24 persons from a total of 120

respondents or 20 % from all respondents. <1 million has 12 persons from a total

of 120 respondents or 10 % from all respondents.

45

B. Instrument Test

Before the colleted data is being analysed, this research test the questionnaire

items must be tested to prove and to avoid difference or mistake in research that

the items can be used by the measurement. Therefore an instruments needed to

test consisted of reliabilities test and validity test.

1. Validity test

This examination is conducted to identify whether the research instrument raised

to measure research variable are valid. If the data were valid, the instrument can

be used to measure what will be measured. Examination of validity conducted by

correlation searching from each indicator to total score by using Pearson Product

Moment with level of error 5% (α = 0.05).

According to According to (Yarnest, 2004) base of validity decision making are:

If p – value < 0.05 the item stated valid

If p – value > 0.05 the item stated not valid

Results of validity examination conducted with the technique of correlation of

Product Moment shall be as follows:

46

Table 4.6

Validity Test of Tangible

Dimension Correlation Coefficient

Significant Conclusion

Tangible

Tangible 1 Tangible 2 Tangible 3

0.346** 0.337** 0.535**

0.000 0.000 0.000

Valid Valid Valid

Source: SPSS Appendix

Based on the tables of above the validity examination, known that by each

statement item used in research instrument own the p-value less than 0,05.

Therefore, this matter can be interpreted that each the statement item is valid.

Equally, the statement item can deputize or form the construct of Tangible.

Table 4.7

Validity Test of Reliability



Reliability

Reliability1 Reliability2 Reliability3 Reliability4 Reliability5

0.856** 0.646** 0.649** 0.726** 0.844**

0.000 0.000 0.000 0.000 0.000

Valid Valid Valid Valid Valid

Source: SPSS Appendix Based on the tables of above the validity examination, known that by each


47


Equally the statement item can deputize or form the construct of Reliability.

Table 4.8

Validity Test of Responsiveness



Responsiveness

Responsiveness1 Responsiveness2 Responsiveness3 Responsiveness4

0.864** 0.808** 0.802** 0.861**

0.000 0.000 0.000 0.000

Valid Valid Valid Valid





Equally the statement item can deputize or form the construct of Responsiveness.

Table 4.9

Validity Test of Assurance



Assurance

Assurance1 Assurance2 Assurance3 Assurance4

0.635** 0.879** 0.769** 0.833**

0.000 0.000 0.000 0.000



48




Equally the statement item can deputize or form the construct of Assurance.

Table 4.10

Validity Test of Empathy



Empathy

Empathy1 Empathy2 Empathy3 Empathy4 Empathy5 Empathy6

0.608** 0.607** 0.748** 0.591** 0.274** 0.380**

0.000 0.000 0.000 0.000 0.000 0.000

Valid Valid Valid Valid Valid Valid





Equally the statement item can deputize or form the construct of Empathy.

49

Table 4.11

Validity Test of Compliance



Compliance

Compliance1 Compliance2 Compliance3 Compliance4

0.824** 0.797** 0.709** 0.854**

0.000 0.000 0.000 0.000






Equally the statement item can deputize or form the construct of Compliance.

Table 4.12

Validity Test of Customer Satisfaction



Customer Satisfaction Customer Satisfaction1 Customer Satisfaction2 Customer Satisfaction3 Customer Satisfaction4

0.879** 0.897** 0.770** 0.407**

0.000 0.000 0.000 0.000






50

Equally the statement item can deputize or form the construct of Customer

Satisfaction.

2. Reliability test

The researcher uses reliability test in order to measure answer consistency

from respondents. Therefore, it is important to note that the instrument used to

measure all items of the variables is the questionnaire with a number of questions

that should be submitted for the reliability test from among variables concerned

using the Cronbach’s coefficient alpha as the coefficient of reliability.

The Cronbach's Coefficient alpha can be explained as positive relation

between items with the other. According to Sekaran, (2000:312), the closer the

reliability coefficient gets to 1.0, the better the result . In general, if the result is

less than 0.60, then it being considered to be poor, if the result is at the 0 .70

range, then it being considered to be acceptable, and if the result is over 0.80,

then it being considered good. Moreover, the decision establishment is:

If Cronbach’s alpha > 0.60 → construct reliable (acceptable)

If Cronbach’s alpha < 0.60 → construct reliable (unacceptable)

51

Table 4.13

Reliability Test

Construct Items Cronbach’s

Coefficient Alpha

Service Quality 26 0.931

Customer Satisfaction 4 0.742


As shown in the table above, from the result, it can clearly be seen that the entire

outcome for the calculations are above 0.6, which means that all statements

answered by respondents are consistent and unreliable. (To see more about

reliability test measured, see the appendix)

C. Descriptive Statistics

Descriptive statistic is used to display quantitative data or summarize information

about a population or sample. The descriptive statistics clarify results from the

questionnaires that had been answered by the respondents, which consist of

minimum and maximum response mean, standard deviation and variety of each

response

52

Table 4.14

Descriptive Statistic of Tangible, Reliability, Responsiveness, Assurance, Empathy, Compliance, and Customer Satisfaction

N Mean

Tangible 120 4.6542

Reliability 120 4.6329

Responsiveness 120 4.7833

Assurance 120 4.5146

Empathy 120 3.7044

Compliance 120 4.6076

Customer Service 120 4.9944 Source: SPSS Appendix

Based on the result described in the table 5 above, all of the variables have

120 samples. The table above shows the mean or the average and standard

deviation for each dimension. The mean value shows the average respondent’s

rate to a certain variable, while the standard deviation value describes the

deviation of the average questions from the questionnaire.

In the Tangible dimension, which consist of visual judgment, speed and

efficiency, and opening hours, showed that the respondent’s mean value is 4.6542.

it showed that the respondents have an average degree for Tangible dimension

that the visual judgment, speed and efficiency, and opening hours is in good

consideration of respondent view.

In the Reliability dimension, which consists of accurate recording, timely

service, problem solving, product value, and insurance (takaful) facility, showed

that the respondent’s mean value is 4.6329 based on the result, it showed that the

respondents have an average degree for Reliability dimension that the accurate

53

recording, timely service, problem solving, product value, and insurance (takaful)

facility is in good consideration of respondent view.

In the Responsiveness dimension, which consist of visual helpful

employee, quick response, efficient service, and sum of branches, showed that the

respondent’s mean value is 4.7833. Based on the result, it showed that the

respondents have an average degree for Responsiveness dimension that visual

helpful employee, quick response, efficient service, and sum of branches have a

good consideration in respondent view.

In the Assurance dimension, which consists of honest employee,

knowledgeable, confidential data, and financial consultants, showed that the

respondent’s mean value is 4.5146. Based on the result, it showed that the

respondents have an average degree for Assurance dimension that honest

employee, knowledgeable, confidential data, and financial consultants have a


In the Empathy dimension, which consist of internet banking, sum of

ATM’s, 24 hours ATM’s, credit leasing, attractive employee, and low cost,

showed that the respondent’s mean value is 3.7044. Based on the result, it showed

that the respondents have a higher degree for Empathy dimension that internet

banking, sum of ATM’s, 24 hours ATM’s, credit leasing, attractive employee, and

low cost have a good consideration in respondent view.

54

In the Compliance dimension, which consist of interest free transaction,

zakat facility, profit sharing, and interest free loan, showed that the respondent’s

mean value is 4.6076. By this result it showed that the respondents have a low

degree for Compliance dimension that interest free transaction, zakat facility,

profit sharing, and interest free loan have a good consideration in respondent

view.

In the Customer Satisfaction variable, which consist of product

satisfaction, employee service, financial advice, and service quality, showed that

the respondent’s mean value is 4.9944. By this result it showed that the

respondents have an average degree for Customer Satisfaction variable that

product satisfaction, employee service, financial advice, and service quality have a


Tabel 4.15

Descriptive Statistic Tangible No Item Question N Min Max Mean Std. Deviation 1. Assessment of visually-

related services. 120 2 5 3.46 0.659

2. The speed and efficiency of transactions visually.

120 2 4 3.48 0.1209

3. Opening hours are convenient and flexible.

120 2 4 3.26 0.555


In the first statement to measure the Tangible in table 15 above, the lowest

value obtained from the respondent's answer is the scale of 2 in which the 120

respondents who answered the first statement to construct the lowest Tangible

answer is not satisfied. The highest value is the scale of 5 where the highest 120

55

respondents answered very satisfied. The average value for the first statement is

3,46 which means that customers tend to rate Bank visually interesting.

Tangible second statement in measuring the lowest value obtained from

the respondent's answer is the scale of 2,00 where the 120 respondents answered

dissatisfied to construct Tangible second statement, while the highest value of the

respondent's answer is the scale of 4,00 where the 120 respondents answered

satisfied. The average value for the second statement is 3,48, which means fast

and efficient service are visually considered important for the customers of Bank

Syariah.

The third statement in measuring Tangible obtained the lowest score of the

respondent's answer is the scale of 2,00 where the 120 respondents who answered

the third statement to construct Tangible lowest answer was not satisfied and the

highest value is the scale of 4,00 where the 120 respondents who answered the

highest satisfaction. The average value for the third statement is 3,26 which means

that customers tend to feel comfortable with opening hours of Bank Syariah.

The value of the standard deviation of each of these statements to

construct Tangible is the first statement 0,659. 0,1209 on the second statement,

and statement 0,555 in the third. From this value can be known that the

distribution of respondents’ answers to the most varied is the first statement of the

Bank that I observe visually interesting, while most respondents' answers did not

vary is the third statement, the opening hours of Bank Syariah very comfortable

and flexible.

56

Tabel 4.16 Descriptive Statistic Reliability

No Item Question N Min Max Mean Std. Deviation 1. Bank Syariah store

data accurately. 120 3 4 3.50 0.504

2. Bank employees provide services in accordance with the promised time.

120 2 5 3.32 0.635

3. When having problems, the Bank trying to solve the problem with good and cooperative.

120 2 5 3.50 0.632

4. Available products and services of the Bank that adequate.

120 2 5 3.44 0.569

5. Availability of facilities takaful products (insurance).

120 2 5 3.62 0.681


The first statement in assessing the reliability obtained from the lowest

value of the respondent's answer is the scale of 3,00 where the 120 respondents

who answered the first statement to construct the lowest Reliability answered

quite satisfied and the highest value is the scale of 4,00 where the 120 respondents

who answered the highest satisfaction. The average value for the first statement is

3:50 which means that the Bank tends to store customer data accurately.

Reliability second statement in measuring the lowest value obtained from

the respondent's answer is the scale of 2,00 where 120 respondents who answered

the second statement to construct the lowest Reliability answer was not satisfied

and the highest value is the scale of 5,00 where the highest 120 respondents

answered very satisfied. The average value for the second statement is 3,32 which

57

means that employees of the Bank tends to provide services in accordance with

the promised time.

The third statement in assessing the reliability obtained from the lowest

value of the respondent's answer is the scale of 2,00 where the 120 respondents

who answered the third statement to construct Reliability lowest answer was not

satisfied and the highest value is the scale of 5,00 where the 120 respondents who

answered very satisfied highest. The average value for the third statement is 3,50

which has a meaning that when there are problems with customers, employees

tend to overcome the problem of Islamic Banking fine.

The fourth statement in assessing the reliability obtained from the lowest

value of the respondent's answer is the scale of 2,00 where from the 120

respondents who answered the notice to construct the fourth lowest Reliability

answer was not satisfied and the highest value is the scale of 5,00 where from the

120 respondents who answered very satisfied highest.

The average value for all four statements is 3,44 which means that

products and services of Islamic Banks tend adequate. The fifth statement in

assessing the reliability of the responses obtained at the lower scale of 2,00 where

the respondents are of the 120 respondents who answered the notice to construct

the fifth lowest Reliability answer not satisfied and the highest value is the scale

of 5,00 where the highest 120 respondents answered extremely satisfied. The

average value is 3.62 for the fifth statement has a meaning that customers tend to

be satisfied the Bank Syariah provide takaful products (insurance).

58

Tabel 4.17

Descriptive Statistic Responsiveness

No Item Question N Min Max Mean Std. Deviation 1. Employees want to

always help the customer.

120 2 5 3.69 0.630

2. The employees of the bank responsive to customer demand related to what was promised.

120 2 5 3.41 0.596

3. Services at the counter quickly and efficiently.

120 2 5 3.48 0.602

4. The Bank has many branches

120 1 5 3.23 0.719


The lowest score on the first statement in 2,00 scale to measure

responsiveness is where the 120 respondents who answered the first statement to

construct the lowest responsiveness answer was not satisfied and the highest value

is the scale of 5,00 where the highest 120 respondents answered very satisfied.

Average value for the first statement was 3.69 which means that employees tend

to always help the Bank of the customer / client.

In the second statement in measuring responsiveness has obtained the

lowest score of the respondent's answer is the scale of 2,00 where the 120

respondents who answered the second statement to construct the lowest

responsiveness answer was not satisfied and the highest value is the scale of 5,00

where the highest 120 respondents answered very satisfied. The average value for

the second statement is 3,41, which means that employees tend to respond to the

Islamic Banking customer demand.

59

Lowest score on the third statement in 2,00 scale measures the

responsiveness is where the 120 respondents who answered the third statement to

construct the lowest responsiveness answer was not satisfied and the highest value

is the scale of 5,00 where the highest 120 respondents answered very satisfied.

The average value for the third statement is 3,48 which means that the services at

the counters tend to quickly and efficiently.

The fourth statement in measuring responsiveness has obtained the lowest

score of the respondent's answer is the scale of 1,00 where the 120 respondents

who answered the fourth statement to construct the lowest responsiveness to

answer very dissatisfied and the highest value is the scale of 5,00 where the

highest 120 respondents answered very satisfied. The average value for the fourth

claim is 3,23 which means that the Bank tends to have and to open many

branches.

Tabel 4.18

Descriptive Statistic Assurance

No Item Question N Min Max Mean Std. Deviation 1. Bank employees who

work as staff were honest and friendly.

120 3 5 3.87 0.574

2. Bank employees have the appropriate knowledge and provide the necessary answers.

120 3 5 3.48 0.571

3. The Bank provides its customers data is confidential.

120 3 5 3.62 0.702

4. The Bank provides financial consulting.

120 2 5 3.14 0.672


Lowest score on the first statement in 3,00 scale measuring Assurance is

where the 120 respondents who answered the first statement to construct the

60

lowest Assurance answered quite satisfied and the highest value is the scale of

5,00 where the 120 respondents who answered very satisfied highest. The average

value for the first statement was 3.87 which mean that the Bank employees and

friends tend to be polite.

In the second statement in measuring Assurance obtained the lowest score

of the respondent's answer is the scale of 3,00 where the 120 respondents who

answered the second statement to construct the lowest Assurance answered quite

satisfied and the highest value is the scale of 5,00 where the highest 120

respondents answered very satisfied. The average value for the second statement

is 3,48, which means that bank employees are likely to have knowledge and give

appropriate answers to customer required.

Lowest score on the third statement in 3,00 scale measuring Assurance is

where the 120 respondents who answered the third statement to construct the

lowest Assurance answered quite satisfied and the highest value is the scale of

5,00 where the 120 respondents who answered very satisfied highest. The average

value for the third statement was 3.62 which mean that the Bank tends to provide

data the customer / client confidentiality.

Statement of Assurance obtained in measuring the fourth lowest score of

the respondent's answer is the scale of 2,00 where the 120 respondents who

answered the notice to construct the fourth lowest Assurance answer was not

satisfied and the highest value is the scale of 5,00 where the highest 120

respondents answered very satisfied. The average value for the fourth statement is

3,14, which means that the Bank tends to have a financial consultant.

61

Tabel 4.19

Descriptive Statistic Empathy

No Item Question N Min Max Mean Std. Deviation 1. The availability of

internet banking facilities.

120 2 5 3.42 0.683

2. The availability of ATM machines within easy reach.

120 1 5 3.37 0.821

3. Availability of 24-hour ATM services.

120 1 5 3.41 0.826

4. Availability of credit. 120 1 5 3.30 0.736 5. Bank employees may

attract your attention. 120 2 5 3.64 0.615

6. The Bank provides low cost services

120 2 5 3.35 0.615


Empathy first statement in measuring the lowest value obtained from the


the first statement to construct the lowest Empathy answer was not satisfied and

the highest value is the scale of 5,00 where the highest 120 respondents answered

very satisfied. The average value for the first statement is 3,42 which means that

the Bank tends to provide internet banking facilities.

Empathy second statement in measuring the lowest value obtained from

the respondent's answer is the scale of 1,00 where the 120 respondents who

answered the second statement to construct the lowest Empathy answer is not


answered very satisfied highest. The average value for the second statement is

3:37 which means that the Bank tends to provide an easily accessible ATM.

62

Empathy The third statements in measuring the lowest value obtained

from the respondent’s answers is the scale of 1,00 Nowhere the 120 respondents

answered the third WHO Statement to construct the lowest Empathy answer is not

satisfied and the highest value is the scale of 5,00 the highest Nowhere 120

respondents answered very satisfied. The average value for the third statement is

3,41 Which means the Bank That tends to Provide 24 hour ATM services.

Empathy fourth statement in measuring the lowest value obtained from the


the notice to construct the fourth lowest Empathy answer is not satisfied and the

highest value is the scale of 5,00 where the highest 120 respondents answered

very satisfied. The average value for the fourth statement is 3,30 which means that

the Bank tends to provide a term loan with good credit.

Empathy fifth statement in measuring the lowest value obtained from the


all five statements to construct Empathy lowest answer was not satisfied and the


very satisfied. The average value for the fifth statement was 3.64 which means

that the Bank tends to have an interesting personal impressions.

Empathy sixth statement in measuring the lowest value obtained from the


all five statements to construct Empathy lowest answer was not satisfied and


63

very satisfied. The average value for the fifth statement is 3,35, which means that

employees tend Bank provides low cost services.

Tabel 4.20

Descriptive Statistic Compliance

No Item Question N Min Max Mean Std. Deviation 1. The lack of interest on

any transaction conducted.

120 1 5 3.57 0.782

2. Availability of zakat payment facility (without the added tax).

120 1 5 3.60 0.730

3. Sharing of profits on investment products.

120 1 5 3.60 0.755


120 1 5 3.59 0.765


Lowest score on the first statement in measuring compliance is 1,00 scale,

where the 120 respondents who answered the first statement to construct the

lowest Compliance answer is not satisfied and the highest value is the scale of

5,00 where the highest 120 respondents answered very satisfied. The average

value for the first statement is 3,57, which means that tend not to apply the Sharia

Bank interest on any transactions undertaken by customers. Standard deviation on

the first statement constructs Compliance is 0,782, so the standard deviation of the

distribution of respondents' answers can be found most varied is the first

statement, namely the lack of interest on any transaction that I did.

In the second statement in measuring compliance obtained the lowest

score of the respondent's answer is the scale of 1 where the 120 respondents who

answered the second statement to construct the lowest Compliance answer is not

64

satisfied and the highest value is the scale of 5where the highest 120 respondents

answered very satisfied. The average value for the second statement was 3.60

which mean that the Bank tends to provide facility of payment of zakat (without

added taxes). Standard deviation on the first statement constructs Compliance is

0730, so the standard deviation of the distribution of respondents' answers can be

found most did not vary is the second statement is the availability of zakat

payment facility (without the added tax).

Lowest score on the third statement in measuring compliance is 1,00 scale,

where the 120 respondents who answered the third statement to construct the

lowest Compliance answer is not satisfied and the highest value is the scale of

5,00 where the highest 120 respondents answered very satisfied. The average

value for the third statement was 3.60 which mean that the Bank tended to share

the profit on the investment product. Standard deviation in the third statement is a

construct of Compliance 0,755.

Statement of Compliance is obtained in measuring the fourth lowest score

of the respondent's answer is the scale of 1,00 where the 120 respondents who

answered the notice to construct the fourth lowest Compliance answer is not


answered very satisfied highest. The average value for the fourth statement is

3:59, which means that the Bank tends not to interest loans. Standard deviation on

the four constructs Compliance statement is 0,765.

65

D. Hypothesis Testing

The hypothesis is to answer and to find out whether service quality have

impact toward customer satisfaction. It was tested based on the data analysis

single regression method. This study uses null hypothesis. The decision making in

the regression test was based on:

If p-value < 0.05, therefore Ho is rejected

If p-value > 0.05, therefore Ho fails to be rejected

Table 4.21

Hypothesis Testing

Coefficientsa

-5,779 1,160 -4,980 ,000,207 ,011 ,865 18,752 ,000

(Constant)Service Quality

Model1

B Std. Error

UnstandardizedCoefficients

Beta

StandardizedCoefficients

t Sig.

Dependent Variable: Customer Satisfactiona.


The regression formulation are illustrated in the following equation:

Customer Satisfaction = -5,779 + 0,207Service Quality + ε

The table above showed that service quality is proven significantly

contribute to customer satisfaction. The tables examined the influence of service

quality towards customer satisfaction. As it seen from the explanation, the

regression scored at a (positive) 0.207 from the result, indeed that the regression

test conducted before really matched up with the fact presented from the tables.

So it can be referred that there are a positive relationship from service quality

66

towards customer satisfaction variable, and the influence is significantly proven

with p – value 0.000 below 0,05 or the ttable 1,96 < tstatistic 18,752. Thus also

supported the result from the hypothesis testing which stated that service quality

gave positive influence towards customer satisfaction.

The results confirmed that the six dimensions (tangible, reliability,

responsiveness, assurance, empathy, and compliance with Syariah) are

significantly proven have influence toward customer satisfaction. The previous

research from Amin and Isa (2008) also showed the same result that Islamic

banking service quality, reliability was the key driver of service quality, followed

by empathy, tangible, responsiveness, assurance, and compliance, respectively.

The findings of this study indicate that the establishment of higher levels

of service quality will lead customer to have a high level of satisfaction. As a

result, these indicate that service quality is positively associated with customer

satisfaction in Malaysian Islamic banking. In addition, the findings of this study

are consistent with previous studies by Othman and Owen (2001) who stated that

there was a strong link between service quality and customer satisfaction in

Islamic banking.

Arasly et al. (2005a, b) found service quality to be a significant predictor

of customer satisfaction in Turkey’s banking industry. Additionally, Karatape et

al. (2005) identified that service quality has the strongest effect on satisfaction

since satisfaction is a mediator between service quality and purchase intention in

conventional banking. The literature suggests that the implication is clear, the

better the service quality, the higher is the customer satisfaction.

67

Although Islamic banking customers are satisfied with the overall service

quality provided by their banks, it is not guaranteed that their customers do not

switch to other banks. Therefore, Islamic banks need to improve the relationship

between bank and customers, and this is based on customer trust towards the

principles of Shariah (compliance) used in creating that relationship.

68

CHAPTER V

CONCLUSION AND IMPLICATIONS

A. Conclusion

The results confirmed that the six dimensions (tangible, reliability,

responsiveness, assurance, empathy, and compliance with Syariah) are distinct

constructs. The results indicated that Islamic banking service quality consisting of

six dimensions has appropriate reliability has a positive significant relationship

with customer satisfaction.

B. Implication

After obtaining the above conclusions, then there is an input or advice that may be

considered by the marketing manager who is expected to improve the

performance of Islamic Banking. Marketing managers should pay more attention

to several things: 1) Tangible (physical evidence), with updates and improvements

to the interior on a regular basis, giving service process transactions quickly and

accurately, and also imposed a bank opening hours are flexible so visually

interesting Islamic Banking and its clients feel more comfortable. 2) Reliability

(reliability), Bank Syariah should save / give a more accurate customer data,

provide the service time as promised, more cooperative with customers if there are

problems, and provide variety of banking products. 3) responsiveness

(responsiveness), Bank employees are more responsive to customer demand, do

69

not let customers wait too long, also opened a new Islamic Bank branches. 4)

Assurance (confidence / assurance), by providing knowledge about Islamic

Banking products to bank employees, so employees can provide the right answers

in accordance with customer needs, and provide consulting services finance. 5)

Empathy (empathy), in today's digital era, Bank Syariah should create / add

internet banking facilities or improve existing internet banking facility, adding a

24-hour ATM facilities are affordable, provide credit facilities with the best in

customer billings, and reduce the cost of services charged to customers. 6)

Compliance (halal), should apply Islamic economics in the Islamic Banking

business activities, so that will be more satisfied customer to perform transactions

at Bank Syariah.

C .Limitation

1. This study only examined the effect of Service Quality of Tangible,

Reliability, Responsiveness, Assurance, Empathy and Compliance of

Customer Satisfaction at Bank, so that the results of this study do not

necessarily apply to conventional banks or companies other than banking

services.

2. This study only involved 120 respondents Bank customers as samples.

3. In previous research conducted by Amin et. al, (2008), the variables in the

study only the effect of Service Quality Service that consists of Tangible,

Reliability, Responsiveness, Assurance, Empathy and Compliance of

70

Customer Satisfaction alone without including other factors that influence

such as Customer Loyalty.

D. Recommendation

1. Because this study only examined the effect of the Service Quality of

Tangible, Reliability, Responsiveness, Assurance, Empathy and

Compliance of Customer Satisfaction at Bank only, then for future

research is expected to investigate other banks or companies from other

services such as transportation, education, or hospitality.

2. Respondents for further research is suggested to increase the number of

samples so that results obtained more representative of the entire

population studied.

3. For further research is suggested to add other variables such as Customer

Loyalty.

71

REFERENCES

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http://voyager.auckland.ac.nz/cgi-bin/Pwebrecon.cgi?DB=local&Search_Arg=Services+marketing:+integrating+customer+focus+across+the+firm&SL=None&Search_Code=TALL&CNT=20

Appendix 1: Questionaire of Customer Islamic Bank

Karakeristik Responden Karakteristik

Berilah tanda X pada kolom yang tersedia

1. Jenis Kelamin:

( ) Pria

( ) Wanita

2. Usia:

( ) 25 – 35 tahun

( ) 35 – 40 tahun

( ) ≥ 40 tahun

3. Pendidikan

( ) Diploma

( ) S1

( ) PASCA SARJANA

4. Pekerjaan

( ) Peg. Negeri

( ) Peg. Swasta

( ) Wiraswasta

( ) Pensiunan

5. Penghasilan / Bulan

( ) < 1.000.000

( ) 1.000.000 – 2.000.000

( ) 2.000.000 – 5.000.000

( ) ≥ 5.000.000

75

Berilah tanda X pada pernyataan berikut: (Kuesioner)

KETERANGAN

Skala Pengukuran

Sangat Tidak Puas Sangat Puas

1 2 3 4 5 6 7

Tangible :

1. Penilaian secara visual berhubungan dengan

layanan jasa.

2. Kecepatan dan efisiensi dari transaksi.

3. Bank melayani selama jam buka.

Dengan penilaian tujuh skala Likert dinilai dari 1 =

sangat tidak puas hingga 7 = sangat puas.

76

KETERANGAN

Skala Pengukuran


1 2 3 4 5 6 7

Reliability :

6. Bank menjaga pencatatan secara akurat.

7. Karyawan bank memberikan layanan jasa

sesuai dengan waktu yang dijanjikan.

8. Ketika anda memiliki masalah, bank

berusaha mengatasi masalah dan bekerja

sama.

9. Penilaian dari produk dan layanan jasa

dipersiapkan.

10. Adanya fasilitas produk takafu (asuransi).



77

KETERANGAN

Skala Pengukuran


1 2 3 4 5 6 7

Responsiveness :

1. Karyawan ingin selalu membantu para

pelanggan.

2. Para karyawan dari bank tanggap pada

permintaan para pelanggan berhubungan

dengan apa yang dijanjikan.

3. Layanan jasa di counter cepat dan efisien.

4. Bank memiliki dan membuka banyak

cabang.



78

KETERANGAN

Skala Pengukuran


1 2 3 4 5 6 7

Assurance :

5. Karyawan bank yang bekerja sebagai staff

itu jujur dan bersahabat.

6. Karyawan bank memiliki pengetahuan dan

memberikan jawaban sesuai yang

diperlukan.

7. Bank menyediakan data para pelanggan

yang bersifat rahasia.

8. Bank menyediakan konsultan keuangan.



79

KETERANGAN

Skala Pengukuran


1 2 3 4 5 6 7

Empathy :

1. Tersedianya fasilitas internet banking.

2. Tersedianya mesin ATM yang mudah

dijangkau.

3. Tersedianya layanan jasa ATM 24 jam.

4. Tersedianya pinjaman kredit.

5. Karyawan bank dapat menarik perhatian

anda.

6. Bank menyediakan biaya layanan jasa yang

rendah.



80

KETERANGAN

Skala Pengukuran


1 2 3 4 5 6 7

Compliance :

1. Tidak adanya bunga atas transaksi apa pun

yang dilakukan.

2. Tersedianya fasilitas pembayaran zakat

(tanpa ditambah pajak).

3. Saling berbagi keuntungan pada produk

investasi.

4. Tidak adanya bunga pinjaman.



81

KETERANGAN

Skala Pengukuran


1 2 3 4 5 6 7

Customer Satisfaction :

1. Saya puas dengan produk dan layanan jasa

yang disediakan oleh bank saya.

2. Saya puas dengan karyawan yang tanggap

dan memenuhi apa yang dijanjikan

berhubungan dengan layanan jasa yang

diberikan pada saya.

3. Saya puas dengan saran layanan jasa

keuangan.

4. Saya puas dengan tingkat kualitas layanan

jasa yang diberikan dengan baik oleh bank

saya.



82

Appendix 2: VALIDITY TEST

Validitas Tangible

Correlations

1 ,672** ,525** ,346**,000 ,000 ,000

120 120 120 120,672** 1 ,619** ,337**,000 ,000 ,000120 120 120 120,525** ,619** 1 ,535**,000 ,000 ,000120 120 120 120,346** ,337** ,535** 1,000 ,000 ,000120 120 120 120

Pearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)N

T1

T2

T3

Tangible

T1 T2 T3 Tangible

Correlation is significant at the 0.01 level (1-tailed).**.

Validitas Reliability

Correlations

1 ,416** ,396** ,590** ,660** ,856**,000 ,000 ,000 ,000 ,000

120 120 120 120 120 120,416** 1 ,393** ,297** ,488** ,646**,000 ,000 ,001 ,000 ,000120 120 120 120 120 120

,396** ,393** 1 ,387** ,450** ,649**,000 ,000 ,000 ,000 ,000120 120 120 120 120 120

,590** ,297** ,387** 1 ,546** ,726**,000 ,001 ,000 ,000 ,000120 120 120 120 120 120

,660** ,488** ,450** ,546** 1 ,844**,000 ,000 ,000 ,000 ,000120 120 120 120 120 120

,856** ,646** ,649** ,726** ,844** 1,000 ,000 ,000 ,000 ,000120 120 120 120 120 120

Pearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)N

Re1

Re2

Re3

Re4

Re5

Reliability

Re1 Re2 Re3 Re4 Re5 Reliability


83

Validitas Responsiveness

Correlations

1 ,626** ,558** ,687** ,864**,000 ,000 ,000 ,000

120 120 120 120 120,626** 1 ,608** ,545** ,808**,000 ,000 ,000 ,000120 120 120 120 120,558** ,608** 1 ,593** ,802**,000 ,000 ,000 ,000120 120 120 120 120,687** ,545** ,593** 1 ,861**,000 ,000 ,000 ,000120 120 120 120 120,864** ,808** ,802** ,861** 1,000 ,000 ,000 ,000120 120 120 120 120

Pearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)N

Rs1

Rs2

Rs3

Rs4

Responsiveness

Rs1 Rs2 Rs3 Rs4Responsiveness


Validitas Assurance

Correlations

1 ,495** ,257** ,372** ,635**,000 ,002 ,000 ,000

120 120 120 120 120,495** 1 ,559** ,667** ,879**,000 ,000 ,000 ,000120 120 120 120 120,257** ,559** 1 ,524** ,769**,002 ,000 ,000 ,000120 120 120 120 120,372** ,667** ,524** 1 ,833**,000 ,000 ,000 ,000120 120 120 120 120,635** ,879** ,769** ,833** 1,000 ,000 ,000 ,000120 120 120 120 120


A1

A2

A3

A4

Assurance

A1 A2 A3 A4 Assurance


84

Validitas Empathy

Correlations

1 ,675** ,322** ,086 -,236** -,182* ,608**,000 ,000 ,177 ,005 ,023 ,000

120 120 120 120 120 120 120,675** 1 ,404** ,074 -,349** -,236** ,608**,000 ,000 ,212 ,000 ,005 ,000120 120 120 120 120 120 120,322** ,404** 1 ,356** ,134 ,211* ,748**,000 ,000 ,000 ,072 ,010 ,000120 120 120 120 120 120 120,086 ,074 ,356** 1 ,279** ,314** ,591**,177 ,212 ,000 ,001 ,000 ,000120 120 120 120 120 120 120

-,236** -,349** ,134 ,279** 1 ,424** ,274**,005 ,000 ,072 ,001 ,000 ,001120 120 120 120 120 120 120

-,182* -,236** ,211* ,314** ,424** 1 ,380**,023 ,005 ,010 ,000 ,000 ,000120 120 120 120 120 120 120,608** ,608** ,748** ,591** ,274** ,380** 1,000 ,000 ,000 ,000 ,001 ,000120 120 120 120 120 120 120

Pearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)NPearson CorrelationSig. (1-tailed)N

E1

E2

E3

E4

E5

E6

Empathy

E1 E2 E3 E4 E5 E6 Empathy


Correlation is significant at the 0.05 level (1-tailed).*.

85

Validitas Compliance

Correlations

1 ,597** ,481** ,649** ,824**,000 ,000 ,000 ,000

120 119 120 120 120,597** 1 ,438** ,624** ,797**,000 ,000 ,000 ,000119 119 119 119 119,481** ,438** 1 ,574** ,709**,000 ,000 ,000 ,000120 119 120 120 120,649** ,624** ,574** 1 ,854**,000 ,000 ,000 ,000120 119 120 120 120,824** ,797** ,709** ,854** 1,000 ,000 ,000 ,000120 119 120 120 120


C1

C2

C3

C4

Compliance

C1 C2 C3 C4 Compliance


Validitas Customer Satisfaction

Correlations

1 ,796** ,535** ,109 ,879**,000 ,000 ,118 ,000

120 120 120 120 120,796** 1 ,638** ,129 ,897**,000 ,000 ,080 ,000120 120 120 120 120

,535** ,638** 1 ,228** ,770**,000 ,000 ,006 ,000120 120 120 120 120

,109 ,129 ,228** 1 ,407**,118 ,080 ,006 ,000120 120 120 120 120

,879** ,897** ,770** ,407** 1,000 ,000 ,000 ,000120 120 120 120 120


CS1

CS2

CS3

CS4

Customer Satisfaction

CS1 CS2 CS3 CS4Customer

Satisfaction


86

Appendix 3: Reliability Test Reliability Scale: SERVICE QUALITY VARIABLES

Case Processing Summary

119 99,21 ,8

120 100,0

ValidExcludeda

Total

CasesN %

Listwise deletion based on allvariables in the procedure.

a.

Reliability Statistics

,931 26

Cronbach'sAlpha N of Items

Reliability Scale: Customer Satisfaction VARIABLES

Case Processing Summary

120 100,00 ,0

120 100,0

ValidExcludeda

Total

CasesN %

Listwise deletion based on allvariables in the procedure.

a.

Reliability Statistics

,742 4

Cronbach'sAlpha N of Items

87

Appendix 4: Descriptive Test Descriptives Tangibles

Descriptive Statistics

120 2,00 6,00 4,0167 ,82994120 2,00 6,00 4,5333 1,14447120 2,00 6,00 3,8000 ,87544120

T1T2T3Valid N (listwise)

N Minimum Maximum Mean Std. Deviation

Descriptives Reliability


120 3,00 7,00 4,6417 1,20779120 2,00 5,00 3,6500 ,71772120 2,00 5,00 3,7750 ,76105120 2,00 6,00 3,9083 ,75588120 2,00 6,00 4,3250 ,92729120

Re1Re2Re3Re4Re5Valid N (listwise)


Descriptives Responsiveness


120 2,00 6,00 4,4250 ,92275120 2,00 6,00 3,9917 ,86477120 2,00 5,00 4,0000 ,76696120 1,00 6,00 4,1417 1,07137120

Rs1Rs2Rs3Rs4Valid N (listwise)


88

Descriptives Assurance Descriptive Statistics

120 2,00 6,00 3,9750 ,83477120 1,00 6,00 4,1583 1,02076120 1,00 5,00 3,3917 ,72525120 1,00 5,00 3,2583 ,67979120

A1A2A3A4Valid N (listwise)


Descriptives Empathy


120 3,00 6,00 4,1917 ,66479120 3,00 6,00 4,1833 ,88861120 3,00 6,00 4,0917 ,87923120 2,00 6,00 3,7583 ,86962120 2,00 5,00 3,2000 ,65594120 2,00 5,00 3,0667 ,70691120

E1E2E3E4E5E6Valid N (listwise)


Descriptives Customer Satisfaction


120 1,00 6,00 4,1750 ,90435119 1,00 6,00 4,1261 ,81879120 1,00 5,00 3,8833 ,72394120 1,00 6,00 4,3167 ,97862119

C1C2C3C4Valid N (listwise)


89

o Appendix 5: Result of Linear Regression Regression

Variables Entered/Removedb

ServiceQuality

a . Enter

Model1

VariablesEntered

VariablesRemoved Method

All requested variables entered.a.

Dependent Variable: Customer Satisfactionb.

Model Summary

,865a ,749 ,747 1,43570Model1

R R SquareAdjustedR Square

Std. Error ofthe Estimate

Predictors: (Constant), Service Qualitya.

ANOVAb

724,767 1 724,767 351,619 ,000a

243,225 118 2,061967,992 119

RegressionResidualTotal

Model1

Sum ofSquares df Mean Square F Sig.

Predictors: (Constant), Service Qualitya.

Dependent Variable: Customer Satisfactionb.

90

91

Coefficientsa

-5,779 1,160 -4,980 ,000,207 ,011 ,865 18,752 ,000

(Constant)Service Quality

Model1

B Std. Error

UnstandardizedCoefficients

Beta

StandardizedCoefficients

t Sig.

Dependent Variable: Customer Satisfactiona.

An examination of therelationship between service

quality perception and customersatisfaction

A SEM approach towardsMalaysian Islamic banking

Muslim Amin and Zaidi IsaFaculty of Science and Technology, Universiti Kebangsaan Malaysia,

Bangi, Malaysia

Abstract

Purpose – This study attempts to examine the relationship between service quality perception andcustomers’ satisfaction in Malaysian Islamic banking using the SEM approach.

Design/methodology/approach – This model starts with SERVQUAL measurement scalesconsisting of six dimensional structures: tangibles, reliability, responsiveness, assurance, andempathy, and plus the compliance dimensions to measure Malaysian Islamic banking service quality.Respondents are the customers (Muslim and non-Muslim) who visit the bank counters. They musthave an account with one of the full-fledged Islamic banking and dual-banking systems.

Findings – The results showed that the proportion of Malaysian Muslims’ awareness of the Islamicbanking products and services were high compared to non-Muslim customers. The majority ofthe Islamic banking customers were satisfied with the overall service quality provided by their banks.The findings suggest that the standard model of Islamic banking service quality dimensions shouldconsist of the six dimensions and good determinants of satisfaction. The relationship between servicequality and customer satisfaction was significant.

Research limitations/implications – Further research should be considered in order to gathermore information regarding service quality and customer satisfaction dimensions in the context ofMalaysian Islamic banking industry.

Practical implications – The six dimensions of SERVQUAL represent a valid instrument to measureservice quality in Malaysian Islamic banking. Providing financial counseling to attract Muslim customersto use more Islamic banking products and services is critical, where 60 percent of the Malaysianpopulation is Muslim. There is a potential target market for Islamic banking that needs be concerned.

Originality/value – This research is important in line with the obvious cross-cultural and religiousdifferences between these two key customer segments; Muslims and non-Muslims. In the Malaysiancontext, there is a strategic dimension that needs to be understood.

Keywords Customer services quality, Customer satisfaction, Banking, Islam, Malaysia

Paper type Research paper

IntroductionIslamic banking is a popular topic in Muslim countries. Islamic banking has beenestablished in more than 100 countries, with an estimated $300 billion in assets that areincreasing by 15 percent a year, according to the Asian Banker (2005) afinancial-services consultancy. In Malaysia, where 60 percent of the population is

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Service qualityperception

191

International Journal of Islamic andMiddle Eastern Finance and

ManagementVol. 1 No. 3, 2008

pp. 191-209q Emerald Group Publishing Limited

1753-8394DOI 10.1108/17538390810901131

Muslim, both Islamic banks and conventional banks operate side by side. The firstMalaysian Islamic bank, Bank Islam Malaysia Berhad (BIMB, 2004), was establishedunder Bank Act 1983. The Malaysian Government has issued three licenses forinternational banks to operate full-fledged Islamic banking in 2004. Today, there are11 Islamic banks under the Islamic Banking Act 1983 and eight dual-window banksunder the Islamic Banking Scheme are offering Islamic banking products and servicesin Malaysia. In implementing a dual-window banking system, the Islamic bankingsystem operates in parallel with the conventional banking system (Bank NegaraMalaysia, 2007).

As of June 2006, assets in Malaysia’s Islamic banking increased 5 percent ofRM117.393 million, representing 11.8 percent of the assets in the overall bankingsystem. The market shares of Islamic deposits and financing stood at 15.6 and11.6 percent compared with 11.7 percent in 2005 (Bank Negara Malaysia, 2007).Meanwhile, Bank Islam (BIMB) reported that some 70-80 percent of the bank’s tradeand corporate financing are with non-Muslim clients (Malaysian Business (Ngui, 2004)).Deloitte Touche Tohmatsu Malaysia reported that 70 percent of Islamic banksfinancing in Malaysia was contributed by non-Muslims. Deloitte Touche explainedthat Islamic banking in Malaysia lacks participation from Muslims due to the lack ofawareness among the Muslims in Malaysia (Saifuddin, 2003).

Thus, Islamic banking is not merely of interest to Muslim customers but clearlynon-Muslims customers see benefits from such a system. In an increasingcompetitive and liberalized global banking industry, the competition to attract andretain Muslim and non-Muslim customers is likely to increase. In the future, moreforeign players are likely to enter into Malaysian Islamic banking, thereby pushinglocal banks to innovate and compete more aggressively in developing products andservices. Although, there is a difference between Islamic banks and conventionalbanks, they are nonetheless competing in the same market in terms of offeringcomplementary products and services (Naser and Moutinho, 1997). In order tocompete, Islamic banks probably need to develop effective marketing strategies,upgrade their technological capabilities and develop their human resources. Inparticular, there is a need for Islamic banks to develop and maintain better servicequality and customer satisfaction.

The aim of this paperThis study attempts to examine the relationship between service quality perceptionand customer’s satisfaction in Malaysian Islamic banking by adapting and modifyingSERVQUAL and CARTER scales (Parasuraman et al., 1988; Othman and Owen, 2001,2002). This research is important in line with the obvious cross-cultural and religiousdifferences between these two key customer segments, Muslims and non-Muslims.In the Malaysian context, there is a strategic dimension that needs to be understood.The dichotomy between Muslims and non-Muslims has traditionally been an invisiblefrontier between ethnic groups in light of the role of religion in Malaysia. Thewidespread use of Islamic banking by non-Muslim customers may indicate that thisinvisible barrier can be crossed. That would bode well for the Malaysian Government’seffort to promote national unity.

IMEFM1,3

192

Compliance dimension in Islamic banksIslamic banking is conducted on the basis of Islamic principles, in particular theprohibition of giving or taking interest. The argument is that taking the interest beforea completed economic activity is unfair. Islamic banking is based on the idea of profitsharing after the economic transaction has been completed. Thus, the bank couldtheoretically lose money if a business venture fails to yield a profit. As far as Islamiclaw is concerned, it is unfair if the bank gains a profit while the entrepreneur suffers aloss. Similarly, Islamic banks are not allowed to invest in industries that are consideredunlawful under Islamic law, such as gambling, the selling of alcohol and so forth(Siddiqui, 1992).

There is a compliance dimension that should be made clear. Muslims are told in theKoran that taking interest is a major sin. To protect Muslim customers from interest,Islamic banks have to set up financial instruments that are in accordance with Islamicprinciples and in line with the objectives of Islamic banks. The common products usedin Islamic banking products and services are mudharabah (profit sharing), wadiah(safekeeping), musyarakah (joint venture), murabahah (cost plus), and ijarah (leasing).According to the Bank Act 1983, Islamic banks and banking institutions that offerIslamic banking products and services are required to establish a Syariah AdvisoryCommittee to advice them and to ensure that the operations and activities of the bankcomply with Syariah principles. In addition, the National Syariah Advisory Council setup at Bank Negara Malaysia advises the central bank on the Syariah aspects of theoperations of these institutions, as well as on their products and services (Lock, 1987).

Service quality in Islamic bankingThe foundation philosophy underlying Islamic banking as mentioned above isimportant to add compliance dimension under service quality dimensionst. Othmanand Owen (2001, 2002) used the SERVQUAL dimensions in examining service qualityin Islamic banking. In order to provide useful insights into how the service might beimproved, they attempted to develop an alternative model, called CARTER. Thesestudies have established the compliance factor as dimension of service quality.The findings obtained from this analysis have shown that the CARTER model is amultidimensional variable consisting of six dimensions. The result revealed that theIslamic banking customers placed more emphasis on the compliance dimension,because 93 percent of them said that it is important for Islamic banks to run Islamiclaw principles. However, Erol and El-Bdour (1989) explained that religious factors havenot played an important role in selecting Islamic banks in Jordan. In Malaysia,40 percent of Muslims were motivated to use the Islamic banks due to the compliancefactor (Haron et al., 1994). It means that compliance with Islamic principles appears toplay an important role for Malaysians in determining the decision to select their banks.Meanwhile, the profit orientations motivated Singaporeans to use the Islamic productand service, and Singaporean Muslims were more aware of the existence of Islamicbanking compared to Singaporean non-Muslims (Gerrad and Cunningham, 1997).

Over the last 20 years, research on service quality has grown extensively andsubstantively. The service quality model gained a lot of attention after thecontroversial findings of Parasuraman et al.’s, (PZB) in 1985. The model looked atservice quality as a comparison differentiation between the customer perception andexpectation of the service and the actual performance of the service received by the


193

customer provided by the company at a certain period of time (Parasuraman et al.,1985). In this study, PZB developed a gap model of perceived service quality andrevealed ten dimensions to measure service quality. In a second study in 1988, the tendimensions were reduced to five dimensions. PZB developed a 22-item questionnaireand called it the SERVQUAL model (Parasuraman et al., 1988). Parasuraman et al.(1991, 1994) stated that the SERVQUAL measurement has more diagnostics and morepractical implications than was previously thought.

The SERVQUAL model has provided a comprehensive conceptualization of servicequality with an instrument to measure perceived service quality. This method has beenvery popular with academics and researchers to assess the customer perception ofservice quality for a variety of service industries. The five dimensions of servicequality include:

(1) tangibles (appearance of physical components);

(2) reliability (dependability of service provider and accuracy of performance);

(3) responsiveness (promptness and helpfulness);

(4) assurance (knowledge and courtesy of employees and their ability to inspiretrust and confidence); and

(5) empathy (caring, individualized attention the firm gives its customers).

This is a generic model and instrument for all service encounters. In fact, a number ofresearchers and academics have recently studied the conceptualization andmeasurement approach used for developing the SERVQUAL scale in differentindustries. Dabholkar et al. (1996) suggested that service quality is multi level andmulti dimensional. They found that quality of service is directly influenced by thecustomer’s perceptions of performance levels, and the customers’ personalcharacteristic are important in assessing the value, but not quality. Angur et al.(1999) suggested that the SERVQUAL scale is multidimensional and is able to providemore diagnostic information due to its greater variability across banks than theSERVPERF scale.

Although the SERVQUAL model has greatly contributed to the literature on servicequality it has been criticised. Generally, critics have questioned the multidimensionalnature of the instrument, measurement scales, psychometric properties, and thefeasibility of SERVQUAL as a framework in measuring service quality. Carman (1990)says that the SERVQUAL needed to be customized by adding items or changing thewording of items. The dimensions stability of SERVQUAL was unclear, not completelygeneric, and not sufficient to meet service quality measurement needs. Babakus andBoller (1992) revealed that the SERVQUAL model appears to suffer from a number ofmethodological and measurement flaws. The five dimensions of SERVQUAL failed toconstruct a service quality measurement and the SERVQUAL is uni-dimensionalrather than a five-dimensional construct. They further suggested that thedimensionality of service quality may depend on the type of industry being studied.Cronin and Taylor (1992) suggest that the SERVPERF scale explains more variation inservice quality than does SERVQUAL and the SERVQUAL is unidimensional. Teas(1993) revealed that the P-E model indicates a number of problems of the conceptualand operational definitions of the expectations and the revised expectations (E *)components of the model.

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In retail banking, Newman (2001) suggested that the SERVQUAL model does notappear to be the holistic model and doubted the value of SERVQUAL as a measure ofservice quality. In commercial banks, Jabnoun and Al-Tamimi (2003) explained thatthe dimensions found were different from the original SERVQUAL dimensions,and there were problems with these as there were some overlaps. Cui et al. (2003)revealed that SERVQUAL and SERVPERF were not uni-dimensional. Confirmatoryfactor analysis revealed that the measurement scale lacked validity with samples fromdifferent cultures.

To date, there have been a few empirical studies regarding the dimension of servicequality in Islamic banking, especially in Malaysia. Al-Tamimi and Al-Amiri (2003)modified the five SERVQUAL dimensions to measure service quality in two IslamicBanks (Abu Dhabi Islamic Bank, and Dubai Islamic Bank). They found that reliabilitywas the most important dimension on their instrument. Meanwhile, Jabnoun andKhalifa (2005) studied service quality in the UAE and compared UAE service qualitybetween conventional and Islamic banks. Results of regression analysis revealed thatall four dimensions were significant in determining service quality in conventionalbanks, and only personal skill and values were significant in determining servicequality in Islamic banks. Al-Tamimi and Al-Amiri (2003) did not attempt to addressdifferent dimensions of service quality and no attempt was made to address newservice quality dimensions that might be related to Arab culture ( Jabnoun and Khalifa,2005).

Even though a number of methodological issues have been debated and arecontroversial, the preponderance of research has been strongly influenced by theconceptual model of service quality proposed by Parasuraman et al. (1985), andsubsequently operationalized and refined by the same authors. This articulation of theservice quality construct and its associated SERVQUAL measure has spawnedhundreds of studies across the industries. Furthermore, in adopting service qualityeffectively in Islamic banking, management is required to clearly understand thenature of service quality and how to implement and adjust it in the context ofMalaysian culture. Although, the SERVQUAL dimensions were validated in a westerncontext, it is likely that the cultural difference of consumers will influence itsapplicability in Malaysia. Karatape et al. (2005) suggested that service qualitymeasures developed in one culture may capture service quality sentiments in anotherculture. Therefore, this study provides useful insights for academics and researchers inimplementing SERVQUAL in the Malaysian perspective, especially for Islamicbanking. On the practical side, the overall consistencies between the two groups(Muslims and non-Muslims) in assessing service quality suggest that Islamic bankingoperating in Malaysia can benefit from a standardized approach.

Service quality and customer satisfactionIn the service literature, Oliver (1980) explained that customer satisfaction entails thefull meeting of customer expectation of the products and services. If the perceivedperformance matches or even exceeds customers’ expectations of services, they aresatisfied. If it does not, they are dissatisfied (de Wulf, 2003). In the real world,unsatisfied customers tends to create negative word-of-mouth and convey theirnegative impression to other customers (Lewis, 1991; Newman, 2001; Caruana, 2002).These positive and negative word-of-mouth communications are very useful in Asian


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countries such as Malaysia, where social life and culture are structured in a way toimprove social relationships among them.

Previous research has identified various factors that determine customersatisfaction in the retail banking sector in the USA and Europe. To satisfycustomers, Greek Cypriot bank in Turkey used service quality to achieve customersatisfaction. The SERVQUAL dimensions were explanatory variables in predictingcustomer satisfaction and the reliability dimension had highest impact on overallcustomer satisfaction (Arasly et al., 2005a). This study was consistent with Othmanand Owen (2001) who suggested that there is a strong link between SERVQUAL andcustomer satisfaction. In the Islamic banking industry, customers have put the criteriaof customer satisfaction towards service quality provided by their banks. There wereno big different between both Muslim and non-Muslim customers in this respect inMalaysia. For example, fast and efficient service; friendliness of bank personnel;confidentiality of bank; speed of transaction are as the key criteria which they hassatisfied by their banks (Haron et al., 1994). Finding from college students in Bahrain,indicated that young customers places more emphasis on factors like a bank’sreputation, friendliness of bank personnel, convenient location, 24-hours ATM, andavailability of parking space in selecting their banks (Almossawi, 2001). The bank’sability to deliver these benefits on an on-going basis probably influences the level ofcustomer satisfaction. Banks have provided innovative methods of satisfyingcustomers, such as internet banking and online system, telephone and call center.According to Levesque and McDougall (1996), convenience and competitiveness of thebank are two important factors which are likely to influence the overall satisfactionlevels of a customer.

In the services literature, strong emphasis is placed on the importance of servicequality perceptions and the relationship between service quality and customersatisfaction (Cronin and Taylor, 1992; Taylor and Baker, 1994). Some researchers andacademics described that customer satisfaction is an antecedent of service quality(Parasuraman et al., 1985, 1988, 1991, 1994; Carman, 1990; Bitner, 1990), and othershave counterargued that the service quality as an antecedent of customer satisfaction(Cronin and Taylor, 1992, 1994; Bolton and Drew, 1991; Anderson and Sullivan, 1993)and that service quality is not equivalent to satisfaction (Oliver, 1980). The currentresearch from retail banking sector in UAE, indicated that service quality dimensionsappear to be linked to customer satisfaction, where core and relational dimensions ofservice quality are causal antecedents of customer satisfaction (Jamal and Naser, 2002).

However, there is very little empirical research demonstrating the importance ofservice quality dimensions in determining customer satisfaction (Fisk et al., 1993;Levesque and McDougall, 1996). In a recent study, Levesque and McDougall (1996)found that the performance of the service provider on core and relational dimensions ofservices was an important driver for customer satisfaction in retail banking. Bitneret al. (1994) and Anderson et al. (1994) also point to this link by suggesting thatimproved service quality will provide significant impact of customer satisfaction. Thecausal relationship between service quality and customer satisfaction is the subject ofgreat academic debated and no consensus has been reached (Bahia et al., 2000).Nevertheless, from a theoretical point of view the researchers and academics haveestablished the conceptual definition of customer satisfaction. Then, we develop a setof hypothesis, service quality are positively related to customer satisfaction.

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Conceptual model and hypothesisOur conceptual model is demonstrated and tested as Figure 1. This model starts withSERVQUAL measurement scale, consisting of six dimensional structures: tangibles,reliability, responsiveness, assurance, and empathy, and compliance dimensions tomeasure Malaysian Islamic banking service quality. Furthermore, a conceptual modelof the relationship between service quality and customer satisfaction (Figure 1) isdeveloped based on the literature and hypotheses are explored.

Data collection processA quota sampling technique was used for this study. Quota samples attempt toensure that the sample is representative by selecting sample elements in such a waythat the proportion possessing a certain characteristic is approximately the same as theproportion in the population (Maholtra et al., 2002). To develop these quotas, theresearcher lists relevant control characteristics and determines the distribution ofthese characteristics in the target population. The relevant control characteristics ofthe demographic profile of the initial quota sample were determined based on thecharacteristics of Malaysian banking customers: aged 18 years and older, gender,Muslims and non-Muslims, education, and occupation. The sample elements withineach quota were selected based on the convenient sampling.

In this study, respondents are customers visiting the counters of banks and theymust have an account with one of the fully-fledged Islamic and dual-banking systems.The Islamic banks were the two leading fully fledged Islamic banks (BIMB and BankMuamalat Malaysia Berhad) and the two dual-window banking systems (Maybankand Public Bank) in eight different states of the Peninsula Malaysia. Two branches ofeach state for two fully-fledged Islamic banks, and two branches of each state for twodual-windows banks. The respondents were from four branches of each state in eightstates (32 branches). The Islamic banking sectors were chosen because they representone of the typical service sectors involved in developing economic growth in Malaysia.

These two fully fledged Islamic banks and the two dual-window banks wereselected based on accessibility and have branches across the country. These twocities represent levels of economic development in the southern area ( Johor Bahruand Seremban), two cities represent the north area with rising economic growth

Figure 1.Hypothesis

research model

Tangible

Reliability

Responsiveness

Assurance

Empathy

Compliance

ServiceQuality

CustomerSatisfaction


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(Pulau Pinang and Alor Setar), two cities represent the east coast area (Kota Bharu andKuantan), and two cities represent triangle and central areas where most commercialbanks in Malaysia locate their head offices (Kuala Lumpur and Shah Alam), and arerelatively prosperous compared with north and east coast. The selection of bankbranches across a spread of different cities has the purpose of enhancing thegeneralizability of the findings and representation of Malaysian Muslims andnon-Muslims customers.

Data were collected from personal interviews using questionnaires as ameasurement tool, conducted in eight states in Peninsula Malaysia by six trainedinterviewers during April to July 2007. The questionnaires were distributed in twotypes. First, for the fully-fledged Islamic banking, the questionnaires were given tobank managers and requested them to distribute the questionnaires to their clients.Second, for dual-banking, the interviewers visited and distributed the questionnairesby hand to the customers outside the bank counters. This was done in eight differentstates where the banks were selected. Respondents were selected from among thecustomers who visit the sampled banks during day time and at various days for a weekor a month. In answering the questions, respondents were assured of confidentiality.Various controls and filter questions were put in place to ensure the quality of thesurvey. The purpose of the filter questions was to make sure that the respondents fitthe three basic restrictions, being 18 years old or over, holding an account with Islamicbanking and dual-banking systems, Malaysian Muslim and non-Muslim Islamicbanking customers. The last filter question was to ensure that the respondents agreedto participate in this survey. They were politely approached and the purpose of thestudy was explained. The questionnaire was written in Malay language to ensureclarity, while the respondents in this research are all Malaysians where their nationallanguage is Bahasa Malaysia.

A total of 660 questionnaires were distributed and 440 were returned (66.7 percentresponse rate). The sample characteristic includes 214 customers of fully-fledgedIslamic banks and 226 customers of the dual-banking system. Females account for 46.6and males 53.4 percent of the customers of fully-fledged Islamic banks and thedual-window banks. Muslims make up 71.1 and non-Muslim 28.9 percent of thecustomers of both the fully-fledged Islamic banks and dual-window banking systems.According to Anderson and Gerbing (1988) and Hair et al. (2004), this sample sizeshould be sufficient to obtain a converged and proper AMOS solution for models withthree or more indicators per factor.

The instrumentThe five dimensions of SERVQUAL as proposed by Parasuraman et al. (1988), Othmanand Owen (2001, 2002) and Jabnoun and Al-Tamimi (2003) were adapted and modifiedin this study. The modifications consisted of substituting questionnaire itemsparticularly suited to a specific service industry (Islamic banking) and context(Malaysia). The original items were translated and modified into Bahasa Malaysia, andtheir content validity (wording and meaning) was checked carefully by two Malaysiansexperts. A pre-test was then conducted with a group of bank customers, and minorchanges to the scales were made accordingly to ensure that the questions were notrepetitive. The wording reflected the local Islamic context. A seven-point Likert scalewas used to measure the perception of perceived quality which ranged from

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“1 ¼ strongly disagree” to “7 ¼ strongly agree”. To avoid the issues of conceptualand psychometric properties raised by Cronin and Taylor (1992) and Babakus andBoller (1992) by using different scores, and to be more efficient the researchers only hadto measure perception of quality (Dabholkar et al., 1996; Yavas et al., 2004).

In addition to the original SERVQUAL scale, relevant items from the Islamicbanking service quality scale (Othman and Owen, 2001; Jabnoun and Al-Tamimi, 2003)were also adapted and incorporated. For example, compliance items one, two, three,and four are items from compliance aspects of the Islamic banking service quality scale(Othman and Owen, 2001). Subsequently, empathy items one, two, and three fromthe empathy dimension of commercial bank service quality were also incorporated inthe current scale (Jabnoun and Al-Tamimi, 2003).

Studies on customer satisfaction within the banking sector measured the constructwith multi-item measures (Levesque and McDougall, 1996; Fornell et al., 1996) thatidentified how satisfied a customer felt with products and services provided by Islamicbanking. In addition, a seven-point scale ranging from “1 ¼ very un-satisfied” to“7 ¼ very satisfied” was used to measure the customer perception and assessment tooverall satisfaction. Finally, demographic information and product knowledge ofIslamic banking customers were elicited from the respondents.

ResultsThe understanding of Islamic banking terminologyThis section evaluated whether both Malaysian Muslim and non-Muslim customersunderstood Islamic banking terminologies. As shown in Table I, Malaysian customersshow a good understanding of the terminology in term of products and services offeredby Islamic banks. The results indicate that terms such as riba (84 percent),mudharabah (75 percent), murabahah (61 percent), and ijarah (64 percent) are generallyunderstood. Thus, approximately 27 percent of Muslim respondents could not definethe meaning of ijarah and murabahah. Surprisingly, more than 50 percent non-Muslimcustomers could answer accurately the meaning of riba and mudharabah and had littleunderstanding of ijarah and murabahah, but most of them were using these productsand services.

A study conducted by Gerrard and Cunningham (1997) indicates that Muslimrespondents in Singapore were unaware of the specific meaning of Islamic bankingterminology like mudharabah, musharakah and ijara. Meanwhile, Naser et al. (1999)reported that Jordan’s customers were more aware of specific Islamic terms ofmurabahah, mudharabah, and musharakah, but they were not using these specifictypes of Islamic banking. Surprisingly, their results reported that 47 percent ofIslamic banking customers were totally unaware of ijara. For Malaysian bank

CorrectTerm Muslim responses (n ¼ 313) Non-Muslim responses (n ¼ 127) Total (n ¼ 440)

Riba 286 87 373Mudharabah 260 70 330Murabahah 233 35 268Ijarah 222 58 280

Table I.Product knowledgeof Islamic banking


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account holders, the majority of the customers indicated that they held a savingaccount and current account, and 44 percent of the respondents held an account infinancing and investment (Table II). These results supported by Haron et al. (1994)indicated that most frequently Muslim and non-Muslim customers held savingaccounts.

The history of banking relationshipsThis study of historical Islamic banking relationships will give information regardingthe bank’s customer background and customer’s relationship with their banks. As seenin Table II, the results showed that the majority of customers have good relationshipwith Islamic banking where they hold accounts above three years. Meanwhile,23.3 percent of the customers have been customers for two years, 18.4 percent for threeyears, and 13.2 percent below one year. It means that both customers have goodrelationship with the Islamic banks and there was a relatively high degree of stabilitymaintaining relationships between them.

Muslim and non-Muslim perception of service qualityTable III shows the mean scores and t-test coefficients for the significance perceptionbetween Muslim and non-Muslim customers on the service quality dimensions.

In general, all items for both Muslim and non-Muslim customers have a meanhigher than four (out of seven). This indicates that both Muslim and non-Muslimcustomers perceived that they were receiving a high level of service quality. In thiscase, Muslim customers have higher mean score compared to non-Muslim customers.The highest mean scores for Muslim customers was 5.62 (bank provides datacustomers confidentiality), and the lowest mean scores was 4.56 (bank provides morebranches to open up). At the same time, the highest mean scores of non-Muslimcustomers was 5.48 (bank keep its records accurately), and the lowest mean scores was4.07 (bank provides more branches to open up).

A t-test was used to test the statistical differences between mean scores perceptionof service quality between Muslim and non-Muslim customers. According to Table IIIagain, most items shown statistically significant differences (r , 0.05) in qualityperception between Muslim and non-Muslim customers in the Malaysian Islamicbanking context. Interestingly, for the compliance dimension, the three items were notstatistically significant different regarding the perception of receiving service qualitybetween Muslim and non-Muslim customers, and only one item has significant

Attribute Percentage

The period time of bank’s customer relationshipLess one year 13.2One to two years 23.0Two to three years 18.4Above three years 45.5The customer bank accounts typesCurrent account 12.5Saving account 43.6Investment and financing account 44.0

Table II.The history Islamicbanking relationships

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differences perception between Muslim and non-Muslim customers (provision of profitsharing investment product, r ¼ 0.012). This indicated that non-Muslim customerswere more concerned with the profit that they could acquire from Islamic bankingproducts and services.

MeanMuslim

(n ¼ 313)Non-Muslim

(n ¼ 127) r-value

TangibleT1 Visually appealing materials associated with

services 5.12 4.94 0.189T2 Speed and efficiency of transactions 5.22 4.82 0.002T3 Bank has convenient opening business hours 5.46 5.29 0.166ReliabilityR1 Bank keeps its records accurately 5.51 5.48 0.774R2 The bank employees provide services at the

promised time 5.30 5.03 0.022R3 When you have problems, bank is able to solve

problem and cooperate 5.17 4.94 0.055R4 Wide range of products and services provided 5.19 4.93 0.033R5 Availability of general takafu l (insurance)

facilities 4.88 4.98 0.482ResponsivenessR1 Employees of bank are always willing to help

customers 5.35 5.06 0.014R2 Employees of bank respond to customer request

promptly 5.20 4.85 0.006R3 Fast and efficient counter services 5.15 4.70 0.001R4 Bank provides more branches to open up 4.56 4.07 0.005AssuranceA1 Employees of bank are polite and friendly staff 5.31 4.91 0.002A2 The bank employees are knowledgeable and

give precise answers to our inquiries 5.13 4.88 0.034A3 Bank provides data customers confidentiality 5.62 5.44 0.149A4 Bank provides financial advice 4.86 4.65 0.107EmpathyE1 Availability of internet banking facility 5.14 4.76 0.017E2 Availability of ATM machines is easily

accessible 5.04 4.56 0.001E3 24 hours availability of ATM service 4.98 4.55 0.004E4 Availability of credit on favorable terms 5.08 4.86 0.086E5 The bank employees give you personal

attention 5.08 4.07 0.002E6 The bank provides lower service charges 5.01 4.69 0.017ComplianceC1 Provision of free interest neither paid nor taken 4.79 4.49 0.072C2 Availability of zakat (alms tax) payment facility 5.22 5.06 0.191C3 Provision of profit sharing investment product 4.87 4.46 0.012C4 Provision of free interest loans 4.76 4.66 0.555

Note: Significance at the 0.05 level

Table III.Distribution of mean

scores and t-test resultsof service quality


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Overall customer satisfaction with Islamic bankingAs seen in Table IV, the level of customer satisfaction was measured using a sevenpoint Likert scale ranging from “very unsatisfied (1)” to “very satisfied (7).” The resultsfrom the table showed that the majority of respondents have a positive impressionabout the overall service quality provided by Islamic banking. The products andservices provided by Islamic banks showed the highest mean score was 5.03, followedby the overall service quality, employees respond and prompt services, and financialservices advice, respectively, (5.02, 4.86, and 4.84).

Furthermore, the Malaysian Islamic banking customers were very satisfied andsatisfied with the products and services provided by their banks. This study isconsistent with the studies reported by Metawa and Almossawi (1998) where theynoticed that the Islamic bank customers in Bahrain were satisfied with those productsand services provided by their bank, but not satisfied with the financial facilities.Meanwhile, Othman and Owen (2001) demonstrated that 78 and 65 percent of Islamicbanking customers were satisfied with overall and personal contact with bank staff.

First-order CFA model of Islamic banking service qualityThe most direct application of structural equation modeling is a confirmatorymodeling strategy. The researcher specifies a single model, and an SEM approach isused to assess how well the model fits the data set. If the proposed model hasacceptable fit by whatever criteria are applied, the researcher has not proved theproposed model but only confirmed that it is one of several possible acceptable models(Hair et al., 2006).

To assess the measurement model, two analyses were conducted. First, a first-orderCFA model was conducted to examine the measurement model using AMOS 5.The purpose of a measurement model is to describe how well the observed indicatorsserve as a measurement instrument for the latent variables. Second, the squaredmultiple correlation was conducted to measure each indicator and how well an itemmeasures a construct (Al-Hawari and Ward, 2006; Holmes-Smith, 2001; Hair et al.,1998). The first run of squared multiple correlation showed that the majority of themeasurement items indicated a value greater than 0.5, which indicated a goodreliability level (Holmes-Smith, 2001). However, five items had R 2 values less than0.4. By checking the squared multiple correlations for each measurement items, fiveitems were dropped as the R 2 values were less than 0.4. The effect of high of R 2

values indicated the acceptance of model fit. As result of this procedure, 21 observedindicators from the original 26 were derived to estimate the model fit.

Attribute label Meana Rank

I am satisfied with products and services providedby my banks 5.03 1I am satisfied with employees respond and promptservices 4.86 3I am satisfied with financial services advice 4.84 4The overall service quality provided by my banks isexcellent 5.02 2

Note: aMaximum – 7

Table IV.Degree of satisfactionof services offeredby the Islamic bank

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To test the reliability of the Malaysian Islamic banking service quality instruments, theCronbach’ a coefficient was computed. The coefficient a exceeded the minimumstandard of 0.70 (Nunnally and Bernstein, 1994). This indicated that good estimates ofinternal consistency reliability were provided. The coefficient a obtained greatlyexceeded the minimum acceptable values which are 0.75, 0.79, 0.82, 0.84, 0.83, 0.77,respectively, (tangibles, reliability, responsiveness, assurance, empathy, andcompliance with Syariah). The estimates of standard factor loadings were used todetermine the validity of the SERVQUAL dimensions. The factor loadings in theconfirmatory factor analysis ranged from 0.56 to 0.89 for the SERVQUAL dimensions.Because each factor loading on each dimension is more than 0.50, the convergentvalidity for each dimension of the SERVQUAL scale was established and providedevidence of construct validity (Hair et al., 1998).

A re-run CFA was conducted, and the results of measurement model showed thatthe goodness-of fit was satisfied (Table V). Although, the GFI value of 0.89 did notmeet the threshold of 0.90, but the value was very close to the recommended thresholdlevel. The RMSEA value of 0.07 and CFI value of 0.92 were above the threshold level of0.08 and 0.90. The results show that 21 indicators of first-order CFA model of Islamicbanking service quality were fit to the sample data.

Structural equation modelingA structure model of Islamic banking service quality was conducted to estimate theparameters. In this model, there were six models from the first-order constructs(tangible, reliability, responsiveness, assurance, empathy, and compliance), and twosecond-order construct (service quality and customer satisfaction). The dimension oftangible was measured by three indicators, reliability by four indicators,responsiveness by three indicators, assurance by three indicators, empathy by fiveindicators, and compliance by three indicators. The objective of conducting thestructure model was designed to test that Islamic banking service quality is amultidimensional construct consisting of six sub-dimensional and each dimension hasa positive relationship with Islamic banking service quality. The causal structuremodel shown in Figure 1 of antecedent customer satisfaction was designed to test thehypothesis that customer satisfaction was influenced by perception Islamic bankingservice quality.

According to our hypothesis (Figure 1), results of the research model indicate theacceptable goodness-of-fit models (Table V). The x 2 is significant (x 2 ¼ 772.684,x 2/degree of freedom (x 2/df)) ratio 2.883, r ¼ 0.000, which is expected given thesample size. Although, the GFI value of 0.87 and AGFI value of 0.84 did not meetthe threshold of 0.90, their values were in range of the recommended levels. The modelhad a CFI of 0.93 and NFI of 0.89 indicated that the model is parsimonious, since the

Variable GFI CFI x 2/df RMSEA Sig.

Measurement model 0.89 0.92 3.274 0.07 0.000Structure model 0.87 0.93 2.883 0.06 0.000

Notes: Measurement model – 21 items; structure model – 21 items

Table V.Goodness-of-fit statistics

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value is close to 0.90. Bentler (1990) and Hair et al. (2006) suggested that both CFI andNFI should be the index of choice, and these were consistent in suggesting that thehypothesized model represented an adequate fit to the data. Even if the model fits thedata, it is not necessarily the correct model. Many equivalent models can fit the dataequally well as judged from any goodness-of-fit measure (Anderson and Gerbing,1988).

Meanwhile, the model had a RMSEA of 0.06, which was below range level andconsidered satisfactory. Overall, the values were close to the threshold and thus theyrepresented an acceptable model fit and the hypothesis was supported. The modelindicated that each dimension of the perception of Islamic banking service quality hada positive relationship with Islamic banking service quality. It means that theSERVQUAL model is still an acceptable and useful instrument to measure servicequality in Malaysia’s Islamic banking industry. The compliance dimension was foundto contribute service quality, and may be a critical aspect for customers in judging thequality of Islamic banking services.

The standardized parameter estimates and significant values for the hypothesisrelationships are presented in Table VI. The findings suggest that the standard modelof Islamic banking service quality dimensions is a good determinant of satisfaction.The standardized regression weight of Islamic banking service quality to customersatisfaction was significant (r ¼ 0.000, a ¼ 0.01) with parameter estimates (0.799).These regression weights explain the degree of association between the construct andthe manifesting variables. In other word, if service quality increased by 1 standarddeviation, the standard deviation of customer satisfaction would have increased by0.799.

Furthermore, the significant path coefficient shown that the reliability and theempathy dimension had the most important positive impact on Malaysian Islamicbanking service quality, followed by tangible, assurance, and responsiveness,respectively. The standardized path was 0.999 for reliability and 0.966 for empathy,0.930 for tangible, 0.915 for responsiveness, and 0.896 for assurance, and compliance is0.242, but it was significant (r ¼ 0.000).

Discussions and conclusionsThe purpose of this study is to measure service quality perceptions of Islamic bankingcustomers and to examine the relationship between service quality and customersatisfaction in the context of Malaysian Islamic banks. The SEM approach was used to

Description Estimate p-values

Tangible ˆ Service quality 0.930 0.000Reliability ˆ Service quality 0.999 0.000Responsiveness ˆ Service quality 0.915 0.000Assurance ˆ Service quality 0.896 0.000Empathy ˆ Service quality 0.966 0.000Compliance ˆ Service quality 0.242 0.000CS ˆ Service quality 0.799 0.000

Notes: Significance at the 0.01 level. CS, customer satisfaction

Table VI.Standardized regressionweights for theresearch model

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test the constructs framework that customer satisfaction was influenced by theperception of Islamic banking service quality.

The results confirmed that the six dimensions (tangible, reliability, responsiveness,assurance, empathy, and compliance with Syariah) are distinct constructs. The resultsindicated that Islamic banking service quality consisting of six dimensions hasappropriate reliability and each dimensions has a positive significant relationship withIslamic banking service quality. For Malaysian Islamic banking service quality,reliability was the key driver of service quality, followed by empathy, tangible,responsiveness, assurance, and compliance, respectively. Reliability had thehighest regression coefficient (0.999). It means that Muslim and non-Muslimcustomers are looking for banks that provide services at the promised time, are ableto solve problem and cooperative, and offer a wide range of products and services. Inother words, Malaysian Muslim and non-Muslim customers more concerned with thereliability dimension than other dimensions as a key factor in establishing relationshipwith their banks. This result is consistent with Parasuraman et al. (1988, 1991) in thatreliability was found to be the most important factor to service quality. Meanwhile,similar results were found in UAE Islamic banking in that the reliability was the mostimportant dimension (Al-Tamimi and Al-Amiri, 2003).

In addition to relationships between service quality and customer satisfaction, priorresearch suggested that service quality has a positive relationship with customersatisfaction (Parasuraman et al., 1988, 1991). The findings of this study indicate that theestablishment of higher levels of service quality will lead customer to have a high level ofsatisfaction. As a result, these indicate that service quality is positively associated withcustomer satisfaction in Malaysian Islamic banking. In addition, the findings of thisstudy are consistent with previous studies by Othman and Owen (2001) who stated thatthere was a strong link between service quality and customer satisfaction in Islamicbanking. Arasly et al. (2005a, b) found service quality to be a significant predictor ofcustomer satisfaction in Turkey’s banking industry. Additionally, Karatape et al. (2005)identified that service quality has the strongest effect on satisfaction since satisfaction isa mediator between service quality and purchase intention in conventional banking. Theliterature suggests that the implication is clear, the better the service quality, the higheris the customer satisfaction.

Althogh Islamic banking customers are satisfied with the overall service qualityprovided by their banks, it is not guaranteed that their customers do not switch toother banks. Therefore, Islamic banks need to improve the relationship between bankand customers, and this is based on customer trust towards the principles of Shariah(compliance) used in creating that relationship. In the Malaysian banking context,Muslim customers’ trust in Islamic banks may be linked to customers perceiving thatproducts and services are running with Shariah principles. One explanation for thiscould be that respondents may have believed and felt that the operations of Islamicbanking system are consistent with Islamic principles, as the mechanisms to ensurethat Islamic banks are Syariah compliance are numerous. The legitimate of Islamicbanks operations are strongly backed up by the Central Bank of Malaysia and SyariahAdvisory Council to assist and supervise the compliance aspects. This confidence isbased on the customer’s belief that Malaysian governance rules sufficiently superviseIslamic banks. This has significant impact on consumer behavior decisions andinfluences their perceptions towards Islamic banks.


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Implications for managementIn addition to the responses of attitudes towards Islamic banking, there were nosignificant differences between Muslim and non-Muslim customers. In the context ofthe history banking relationship, most of them have had banking experience and dealtwith Islamic banking for more than one year. The greater the number of yearsrelationship between customers with their banks, the higher degree of their customersin holding the bank accounts. It is advantageous for Islamic banking to maintain along-term relationship with their customers.

In general, this study highlights that Malaysian consumers are more satisfied withproducts and services provided by fully-fledged Islamic banking and dual-windowbanking. In fact, reliability and empathy dimensions were the main important factorsof service quality in Malaysian Islamic banks. Therefore, Islamic banks may berequired to do more promotion and focus on strategic choice in providing products andservices which are more innovative in order to gain competitive advantage. Islamicbanking should provide financial counseling to attract Muslim customers to use moreIslamic banking products and services where 60 percent of the Malaysian population isMuslim. There is a potential target market for which Islamic banking should beconcerned. Today, high competitiveness and availability of products and services andinnovation in a global banking market, requires that Islamic banking has no choice butto focus on attracting, developing, and retaining customer satisfaction. It can beachieved if Islamic banking has good information about the level of bank customersatisfaction. In fact, the prerequisite of high-quality service may be a differentiationstrategy in enhancing customer satisfaction.

Limitations and further researchFurther research should be considered to gather more information regarding theservice quality and customers’ satisfaction dimensions in context of the MalaysianIslamic banking industry. The limitation of this study was the difficulty inapproaching the respondents for the dual-window banking. This is due to their officehours. The borders between the Islamic bank and conventional bank customers exist.It was different with the fully-fledged Islamic banking in that we could automaticallyidentify the customers. The potential of the inaccurate data collection exists due to thequestionnaires that were distributed through the branch managers. For furtherresearch, the researchers need to increase the number of banks involved in the researchstudy, the number of respondent, and the research should represent the wholeMalaysia.

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Corresponding authorMuslim Amin can be contacted at: [email protected]


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