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Article
Publication date: 1 October 2018

Fayaz Ahmad Lone and Ulfat Rashid Bhat

The purpose of this paper is to find out the importance of the tag “Islamic” in the title of banks. This will help to determine the future strategy of Islamic banks, while…

Abstract

Purpose

The purpose of this paper is to find out the importance of the tag “Islamic” in the title of banks. This will help to determine the future strategy of Islamic banks, while expanding to the countries where Islamic banking is seen as a religious banking and not an as an alternative approach to the conventional banking.

Design/methodology/approach

Adopting convenience sampling, a total of 596 customers of both Islamic and conventional banks were surveyed from four regions of Saudi Arabia (Makkah, Madinah, Riyadh and Dammam) using a self-structured questionnaire on a five-point Likert scale.

Findings

The results concede that Islamic banks without the tag “Islamic” and conventional banks have same customer satisfaction. There are some factors other than the tag “Islamic” which are driving customers towards Islamic banking. Those factors include physical aspects of the bank, level of satisfaction with the services, dealing and attendance by the staff and safety and security of the bank. Besides, the application of fundamental principles of Islamic banking works as a key motivation for customer satisfaction with Islamic banking.

Practical implications

Applying the tag “Islamic” is not as important as implementing the principles of Islamic banking. Islamic banks can survive and compete well even without using the “Islamic” tag if they implement the prime principles of Islamic banking and work on improving the factors highlighted by this study. This study can prove to be helpful in the expansion of Islamic banking in the countries where religious banking is not generally preferred by customers.

Originality/value

This is the first study to find out the customer satisfaction in a dual banking system (comprising of conventional banks and Islamic banks that do not use the tag “Islamic”), thereby filling the existing gap in the Islamic banking literature.

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