CUSTOMER’S CRITERIA FOR SELECTING AN ISLAMIC BANK:

EVIDENCE FROM PAKISTAN

Presented in
1st International Conference on Islamic Marketing & Branding (Kuala Lumpur, Malaysia)

Won the Best Paper Award

E-mail corresponding author: khurambukhari@bzu.edu.pk

 CUSTOMER’S CRITERIA FOR SELECTING AN ISLAMIC BANK:
EVIDENCE FROM PAKISTAN
a
Hayat, M. Awan
b
Khuram Shahzad Bukhari

a, b
Institute of Management Sciences
Bahauddin Zakariya University, Multan

Abstract:

Purpose –Islamic banking is an emerging financial system in the contemporary world. Currently it is
found mostly in Islamic countries or in countries where OPEC oil revenues have been invested. Most of
the research has therefore been oriented towards macro-environment issues, ignoring the market oriented
problems. This study is micro-oriented however and attempts to determine the conditions under which
Islamic banks can successfully compete with conventional banks by understanding customer attitudes
towards Islamic banking products.

Design/methodology/approach – A sample of 250 respondents was taken from four cities of Pakistan to
examine customer awareness of key products/ services being offered by Islamic banks, usage of those
services and customer satisfaction with the service delivery mechanism being used by pure Islamic banks
and Conventional banks with Islamic bank branches (IBBs). Data for this study collected by using a
structured questionnaire containing two sections, whereas section-I contains 10 statements using Likert
scale, for assessing customer‘s preferred selection criteria for Islamic banks. These statements are
developed based on past literature. Section-II deals with the questions related to the social and
demographic profiles of respondents.

Findings –Analysis of data indicated that most of the customers value product features and quality of
service as major factors for making selection of Islamic banks, and give lesser importance to religious
belief as influential factor in selecting an Islamic bank. Findings suggest that there is a lack of awareness
about basic conventions of Islamic financing options among respondents and customers of both the pure
Islamic banks and conventional banks with Islamic bank branches do believe that the bank‘s staff lacks
ability to provide credible information about religious compliance of Islamic banking financial services

Originality/value – this study has practical significant for Islamic banking policy makers for
understanding the key behavioral and demographical dimensions of their customers and use these
dimensions for effectively positioning Islamic banking financial instruments, developing policies ; and
articulating procedures to maximize customer satisfaction and to ensure better exchange of value.

Key Words: Islamic Banking, Strategic Positioning, Service Quality, Determinants of bank selection,
customer satisfaction, consumer behavior.

INTRODUCTION
At its core, Islamic banking is a prohibition-based industry emerging from Shariah (Islamic law)
restrictions on riba (interest), gharar (transactions involving uncertainty or speculation such as derivative
trading and insurance) and businesses associated with particular sin sectors such as alcohol, pornography
or gambling (Khan and Khanna, 2010). The main prohibitions on interest based banking are because
general belief that it is unjust to earn income without assuming risk (Siddique, 2001). Historically, the
growth of Islamic banking can be attributed to the desire and interest of retail banking customers to invest
their money in accordance with their personal and religious belief (Devlin, J.F 2002). Islamic banking
emerged as a fastest growing industry and has received recognition by both Muslims and non-Muslims
alike (Iqbal and Molyneux, 2005). The Islamic banking industry is now worth almost an estimated US$1
trillion and is widely considered to be one of the fastest growing sectors in the financial world. Even in
the midst of a global economic crisis, Islamic banks weathered the storm to a great effect, which was
thanks to strict regulations administered by Islamic law, or ‗Sharia‘. The estimated size of the industry is
around US$ 700 billion that is expected to reach US$ 1.6 trillion by 2012 (Oliver, 2009; Khan and Bhatti

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2008), with Islamic banking no longer considered as a business entity established only to satisfy the
religious obligations of the Muslim community. Instead Islamic banking is rather as a business that
essentially pursues maximizing customer value and satisfying their financial security needs (Henry and
Wilson, 2004). That is why Islamic banks put more in the effort to position their salient features in line
with customer needs, which requires them to monitor customer preferences for their investments and
borrowing options closely so as to design appropriate business strategies (Chong and Liu, 2006).

Asset base of the Islamic Banking Institutions (IBIs) in Pakistan has grown by around 60 percent per
annum since 2005; resulting in steady growth in the share of Islamic banking that reached at about 5.5
percent in deposits, and 5.3 percent in assets in September 2009. Currently, IBIs comprise 6 full-fledged
Islamic banks and 13 conventional banks (having dedicated IBBs) with a network of more than 550
branches.2 This is commendable achievement and is, in fact, better than some of the leading countries in
Islamic finance—that started Islamic finance many years earlier than Pakistan. (SBP Islamic Banking
Bulletin Oct. 2009). Since 2003, the domestic Islamic banking industry has shown significant progress.
Table 1 below provides a snapshot of the progress made by the Islamic banking industry in Pakistan from
2003 to 2009.

Islamic Banking in Pakistan (2003-2009)

Descriptions Dec-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04 Dec-03
Total assets 366 276 206 119 72 44 13
% of banking industry 5.6% 4.9% 4.0% 2.8% 2.0% 1.5% 0.5%
Deposits 283 202 147 84 50 30 8
% of Banking Industry 5.9% 4.8% 3.8% 2.6% 1.8% 1.3% 0.4%
Financing. & Investment. 226 186 138 73 48 30 10
% of Banking Industry 4.5% 4.4% 3.5% 2.3% 1.7% 1.3% 0.5%
Full Fledge Islamic Banks 6 6 6 4 2 2 1
Conventional Banks with Islamic
13 12 12 12 9 9 3
Banking Branches
No. of Branches 649 515 289 150 70 48 17
Source: SBP Islamic Banking Bulletin (Oct.-Dec 2009)

In this regard, the capacity of the Islamic banking industry to ascertain a substantial market share in
challenging financial environment (particularly in a dual-banking system like Pakistan) is reliant on the
manner in which Islamic banking institutions can strongly position themselves to sustain a competitive
advantage and offer services and financial instruments that maximize the value of their existing and
potential customers.

The remainder of this paper proceeds with next section presenting a detailed literature review. The second
part of the study discusses the methodology of the study in detail, with third section of the paper outlining
results and discussions and the final section acknowledging the limitations and drawing conclusion of this
study.
LITERATURE REVIEW
Research in social psychology has been valuable in providing key frameworks for understanding the
complex relationship between culture and human behavior. One of the lessons learned from the field is
that cultural variations have a significant impact on the way individuals view the world, which ultimately
affects their behavior (Shweder 1991; Manstead 1997). Culture is an all encompassing force which forms
personality, and in turn is acts as a key determinant of consumer behavior (Mooji, 2004). Without any
significant differences, researches by Bristow and Asquitch (1999), Gurhan-Canli and Maheshwaran
(2000), Chudry and Pallister (2002), and Mooji and Hofstede (2002) suggest that consumers from
different cultural background express some significant differences, which may warrant differentiated
marketing efforts. From the managerial perspective, a clear understanding of culture and the degree of
influence that cultural values have on consumer behavior is pre-requisite for designing effective strategies
in marketing to individuals with different nationality, religious values, geography and customs (Cui
1997). According to Sheth (1983, p. 23): ―An individual‘s personal values and beliefs about what to look
for when shopping various products and services reflect that shopper‘s personality and may be
determined by such personal traits as sex, age, race and religion.‖ A religious group to which a person is
affiliated can also serve as a frame of reference making choices of personal consumption (Siguaw and
Simpson 1997).

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Determinant factors of customer’s bank selection
In the context of banking industry, the determinant factors of a customer‘s bank selection have received
significant attention in recent years. Kaufman (1967) found that the most influential factors in customer‘s
selection of a bank were convenient location to home or place of business, length of bank-customers
relationships and quality of services offered by the bank. Mason and Mayer (1974) suggested that among
other important selection criterions used by the customer, convenient location came on the top the
priority, followed by other important factors like friendly personnel; favorable loan experience; advice of
friends; and . Influence of relatives‘ opinion. Findings of various studies reveals that consumer choice of
bank depends on a multiple set of criterions including bank location, availability of loans and the default
salary account of a particular bank ( Martenson, 1985). Another study by Arora et al (1985) found that
customer selection of banking services is mainly determined by dependability of institutions,
accessibility, ‗easiness‘ of processes for transactions, variety of services offered and availability of loans
at competitive interest rates. Laroche et al. (1986) found that friendliness of staff plays the major role in
the bank decision process, followed by hours of operations, size of waiting lines, convenience of location,
and efficiency of personnel.
Determinant factors of a customer’s selection of an Islamic Bank
Religious belief as a motive to choose to bank with Islamic banks was described by many of the
researchers in various contexts. (Omer, 1992) in a survey based study of customers Islamic banking
services being offered by conventional banks in UK, found that the higher percentage of clients using
Islamic modes of financing were Muslims. These findings further validated by (Hegazy, 1995) who found
that 98.8% of total customers of Islamic banks in Egypt were Muslims. (Metawa and Almossawi, 1998)
also noted that ‗the bank-selection decisions by bank customers are predominantly religious-based
decisions. ―Adherence to Islamic principles‖ was found to be the most important selection criterion‘. In a
study conducted by (Bashir, 1999) in Kuwait, and (Naser et al., 1999) who studies the preferences of
Islamic banking customers in Jordan endorsed previous findings that suggested religious belief as major
motivation for selecting an Islamic bank. Afurther review of various studies including (Hamid and
Nordin, 2001), (Ahmad and Haron, 2002, Bley and Kuehn, 2004, Zainuddin et al., 2004, Worthington,
2005, Okumu, 2005, Dusuki and Abdullah, 2007, Rashid and Hassan, 2009, Khan and Khanna, 2010)
also support the argument that religious believes serve as main motivation to select an Islamic Bank for
Muslim customers. Contradictory to these findings there is a point of view that religious beliefs are not
the sole reason to select an Islamic bank see (Erol and El-Bdour, 1989, Gerrard and Cunningham, 1997,
Zaher and Hassan, 2001). Dusuki and Abdullah (2006) argued that ‗despite the fact that Sharia compliant
solutions are widely recognized by most of Muslim customers, some empirical studies suggest that
religion is not the sole reason for selecting an Islamic banking service provider‘.

Apart from the fact that ‗the satisfaction of religious responsibilities may or may not be an important
element in bank selection, other motives are reported to have significant a effect of the consumers‘
decisions‘ (Al-Ajmi et al., 2009). One of these significant bank selection criterions is the potential profits
from investing in an Islamic bank. (Erol and El-Bdour, 1989) suggested that ‗in considering motives
responsible for selecting Islamic banks as depository institutions, religious motives did not stand out as
being the only significant ones; bank customers are profit motivated‘. (Haron et al., 1994) in a
comparative analysis of Muslim and non-Muslim customers of Islamic banks found that Muslim
customers believe that investing in an Islamic bank can give higher returns. (Al-Ajmi et al., 2009) found
that ‗the motive ―financial strength and soundness‖ is rated by clients of conventional banks higher than
the rank given by clients of Islamic banks and those who bank with both conventional and Islamic banks‘.

There is a stream of research that advocates service quality and related constructs as major determinants
of customer‘s choice of a bank. There is an agreement among several studies that service quality will
remain a critical factor in determining customer satisfaction with financial services offered by different
banks (Taylor and Baker 1994; Levesque and McDougal 1996; Jamal and Naser 2002; Moutinho and
Smith 2000; and Al-Hawari and Ward 2006). Haron et al. (1994) studied a sample of 301 Muslim and
non-Muslim bank customers in Malaysia for their preferred selection criteria used in a dual banking
environment. Results of this study show that Muslims and non-Muslims almost equally value fast and
efficient services, speed of transactions, staff friendliness, and confidentiality of bank. Avkiran (1999)
concluded that the staff conduct, credibility, communication and easy access to teller services were
discriminating factors behind selection of banking services

In addition to the convenient availability of desired financial services, bank selection criterions also
include the sense of security and protection against social, financial and psychological risk associated

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with bank transactions (Gerard and Cunningham, 2001). Ethnic background and social orientation are
also important determinants of bank selection (Devlin and Ennew, 2004). Kaynak and Harcar (2005)
found that low service charges are vital for customer‘s selection of a particular bank. Other factors like
bank‘s name and image (Ahmad and Haroon, 2002), confidentiality (Naser et al 1999 and Abbas et al
2003), friends and family influence (Metawa and Almossawi 1998 and Abbas et al 2003), provision of
quality services (Ahmad and Haroon, 2002; Othman and Owen 2002; and Ababs et al 2003), and banking
experience (Erol et al 1990 and Gerard and Cunningham 1997) are equally important for customers when
making decision for selecting Islamic bank for financial services.
Objective of the study
This study is designed to investigate customer‘s criteria for selecting an Islamic bank Pakistani context.
Study was attempted to provide answers to questions like what are the criterions customer prefers to use
for selecting an Islamic bank in Pakistan and what factors they mostly rely on, what makes them satisfied.
Furthermore, this study concludes with setting up important implications for existing and potential
players of Islamic banking industry and provides guidelines to the management about how different
customer groups [s] can be targeted and what type of marketing strategies Islamic banks can use to
increase their coverage and maximize value for their customers.
Research Questions
This study, an attempt was made to investigate the following research questions:

i. In order to understand determinants of choice criteria for customer selection of an Islamic bank, this
study aims to assess the effect of religious motivation, bank reputation and image, low or
competitive service charges, location, quality of services, friends and family influence on
customer‘s selection of an Islamic bank.
ii. Extent to which important selection criteria for an Islamic bank selection differs significantly
among Islamic banking customers with different demographic and behavioral profiles.

These aspects are purposely selected for empirical investigation as they have significant prevalence in
literature, with their use to describe reasons for customer‘s choice of particular banking service
institution.

RESEARCH METHODOLOGY
This study is based on a field survey among customers of banks offering Islamic banking services in
Pakistan. The sample size of 250 respondents covers four major cities of Pakistan including Karachi
(Commercial Hub of the country), Lahore (Provincial Capital), Faisalabad (Major Industrial Hub) and
Multan (Southern Punjab; known as city of saints). Almost all the major Islamic banks have their branch
offices in the selected cities. A survey questionnaire was used to collect data. Questionnaire used in this
study was divided into two sections. The first of the questionnaire, respondents were requested to
indicate, on five point Likert scale, ranging from ‗strongly agree‘ to ‗ strongly disagree‘, a statement
explaining the degree of their perceived importance of a factor when selecting an Islamic bank, whilst
second section deals with the collection of information about the respondent‘s personal, demographic and
economic profiles. Most of the factors used in questionnaire were adapted from previous studies on bank
selection criteria like (Gerard and Cunningham 1997; Ahmad and Haroon, 2002; Othman and Owen
2002; Ababs et al 2003; and Dusuki and Abdullah 2006). The questionnaire was first developed in
English and then translated into Urdu by using a backward translation method with the assistance of
experts in both languages, to minimize translation bias or error. A non-probability sampling technique
was used for this study, with respondents randomly selected from Islamic banking customers of both full
service Islamic banking institutions and conventional banks offering Islamic financing services and
instruments. A total of 250 customers of Islamic banking were approached in each of the four selected
cities and after seeking their consent for participation, respondents were requested to fill in the
questionnaire. From a total of 250 questionnaire distributed and collected, 223 questionnaires were found
as valid and complete, thus yielding a response rate of 89% which was sufficient response rate to ensure
statistical reliability and generalisability (Stevens, 2002)

ANALYSIS
The data collected for the study was analyzed by using SPSS in order to ascertain which of the banking
choice criteria were preferred by the customers of Islamic banking in Pakistan. All 10 factors ranked

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according to their importance by performing Friedman test, which is an alternative non-parametric to
One-Way Anova (analysis of variance). Friedman test was used for analysis of variance when data was
scaled on ordinal scale and provided by the same respondent (Norrusis, 2008). Factor analysis was
performed to reduce the variables which may be contributing to less variance of data. In order to examine
the relationship between proffered selection criteria of Islamic bank and demographic variables (region,
age, education, years of experience in Islamic banking and occupation), the Kruskil-Wallis test was used.
This test was used to measure the significant variation in response, because of different demographic
profiles of the respondents of the study.

RESEARCH FINDINGS

Ranking of Selection Criteria

Test statistics for Friedman test are summarized in Table-I. The observed significance level p=0.000 at 9
degree of freedom is lower than the 0.05 confidence level, which indicates that variation among 10
selection variables are likely to hold in the population.

Based on this analysis, we can make the inferences that preferred choice of selection variables is
statistically significant and therefore it can be safely concluded that the customers of both the pure
Islamic banks and conventional banks with Islamic banking branches demonstrate similar preferences for
selecting an Islamic banking services.

Results given in Table-I indicate that highest ranked selection criteria for bank selection for customers
included availability of various financing options and high profitability potential. These findings
corresponds to Gerrard and Cunningham (1997) and Jalaluddin and Metwally (1999), who found that
high rate of return and variety of financing options were considered more important by customers as
among their selection criteria of Islamic banks.

On the moderate level, customers value service quality factors with an equal emphasis on low service
charges and bank reputation. Religion whereas was perceived to be least important criteria for customers
dealing with Islamic banks. This finding is supported by Erol and El- Bdour (1989) who suggest that the
religion is not the primary motivation for Islamic banking customers. Other important factors were fast
and efficient service, the bank‘s reputation and image, and confidentiality which were found by Erol and
El- Bdour (1989). Relatives and family friends also have significant influence on customer intentions
about banking with Islamic banks, which is a finding that is supported by Erol, Kaynak and El-Bdour
(1990).
Table-I Ranking of Bank Selection Criteria (Friedman Test)
Important
Mean Rank
Rank
Bank offers a variety of financing options 6.67 1
Profitability (potential of high returns) 6.63 2
Low service Charges 6.10 3
Ease of Accessing Banking services 5.86 4
Good Repute among Commercial Banks 5.57 5
Recommendations From Friends / Family 5.52 6
Expertise and Professional competence of Bank’s 5.30 7
Consulting staff / Advisor
Your privacy and confidentiality 4.94 8
Friendly and Responsive attitude of Bank Staff 4.57 9
Religious Motives (Shria Compliance) 3.81 10

N 223
Chi-Square 222.073
Degree of Freedom 9
Asym. Sig. .000
After analyzing the customer priorities of Islamic bank selection criteria, a factor analysis was carried out
with Varimax rotation and presented in Table-II.
Factor Analysis

Table-II Factor Analysis for Bank Selection Criteria

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 1 2 3
Customer
Communality
Product Service Subjective
Variables of each
Features Quality Norms
variable
Profitability (potential of high Return) 0.627 0.717
Low service Charges 0.706 0.555
Your privacy and confidentiality 0.537 0.552
Bank offers a variety of financing options 0.702 0.520
Ease of accessing banking services 0.792 0.742
Expertise and Professional competence of Bank’s Consulting
staff / Advisor 0.796 0.645

Good Repute among Commercial Banks 0.536 0.510

Friendly and Responsive attitude of Bank Staff 0.817 0.695
Religious Reasons Only 0.825 0.712
Profitability (potential of high Return) 0.699 0.643

The factor analysis of data defines customer choice of selection criteria for Islamic banks in Pakistan.
Most of the studies regarding bank selection preferences and customer patronage behavior in financial
services use factor analysis with varimax rotation and Kaiser Normalization (See Hegazy 1995; Metwally
1996; Al-Sultan 1999; and Gerrard and Cunningham 1997). The results in Table-II suggest that there are
three factors with all 10 items of customer choice of bank selection criteria, providing a large factor
loading (above 0.5 significant levels. All three factors explain a cumulative variance of 64.838 percent.
Factor 1 and, Factor 2 have four significant loadings, while factor 3 has only two significant loadings.
These results suggest that the selection of Islamic bank would be a combination of F1 (Product features),
F2 (Service Quality) and F3 (Subjective norms that includes compliance with religious guidelines and
recommendation by friends and family).

Customer selection criteria and Demographics

Different groups of customers with diverse demographic backgrounds were involved in this survey on the
selection of Islamic baking services. To measure any significant differences in their responses or to assess
whether the average perceptions about the variables studied were identical for all participating groups,
with the Kruskil-Wallis test was used along with computation of x 2 (Naser et. al, 1999). The results of
the relationship between the determinants of Islamic bank selection and different demographic variables
associated with respondents (i.e. region, age, education, occupation and years of experience in availing
Islamic banking services) have been reported in Table –III.

Table –III
YEARS OF
REGION AGE EDUCATION OCCUPATION
EXPERIENCE
VARIABLE X2 Sig X2 Sig X2 Sig X2 Sig X2 Sig
Religious Reasons only 13.888 0.003 6.691 0.082 5.279 0.383 2.745 0.601 2.51 0.474
Profitability 10.285 0.016 7.736 0.052 3.539 0.617 18.778 0.001 10.793 0.013
Recommendations Friends 1.432 0.698 2.416 0.491 2.955 0.707 7.981 0.092 2.958 0.398
Easy access banking services 2.441 0.486 3.945 0.267 6.927 0.226 6.773 0.148 1.162 0.762
Low service charges 13.341 0.004 2.431 0.488 2.376 0.795 0.768 0.943 1.989 0.575
Customer's privacy 9.782 0.021 4.388 0.222 12.708 0.026 4.596 0.331 6.735 0.081
Variety of financing options 14.288 0.003 4.341 0.227 11.159 0.048 2.935 0.569 8.312 0.04
Expertise of bank's
consulting staff/advisor 21.535 0.000 4.763 0.19 13.403 0.02 6.681 0.154 1.369 0.713
Good repute of bank 19.814 0.000 4.501 0.212 4.852 0.434 9.778 0.044 3.147 0.37
Friendly attitude of bank's
staff 29.568 0.000 2.188 0.534 14.636 0.012 9.993 0.041 1.866 0.601
*Kruskil-Wallis Test Statistics

The results provide evidence that responses collected from different regions differ significantly as far as
in the selection of Islamic banking services is concerned. Respondents from Karachi (the capital city of
Sindh and city with the largest population in Pakistan) emphasized heavily religion as the basic reason for
selecting Islamic banking services, whilst respondents from Lahore (the capital city of Punjab) were
relatively least concerned about considering religion as the main motive in this regard. Karachi is

7
characterized with having a majority of people having a high association with religious groups/political
parties, so this result is as per the expectation. For profitability and low service charges, respondents from
Lahore show the highest concern, compared with Multan whose respondents had relatively the least
concern about these two variables. The understandable reason for this is the industrial nature of customers
in Lahore and the majority of respondents with agricultural background were in Multan. Moreover,
respondents from Karachi gave relatively high weightage to customer‘s privacy & confidentiality,
expertise & professional competence of bank‘s consulting staff and friendly & responsive attitude of
bank‘s staff. Knowing Karachi is the trade and industrial hub of Pakistan, which has relatively more
sophisticated and has a higher-educated market, the results are as per the expectation. However,
customers from Lahore showed a relatively higher concern for variety of financing options offered by
banks, and good repute of Islamic banks with other commercial banks.

Other demographic variables of age, education, occupation and years of experience in using Islamic
banking services did not report as much significant differences in responses as reported by regions.
However, in case of age, responses differed significantly for considering religious reason only as a
determinant of Islamic bank selection. People from higher age group (above 50 years) was more
associated with religion, and exhibited a higher tendency to opt for Islamic banking based on religious
motives. For ‗education‘ as a demographic variable, respondents having qualification of matriculation or
below matriculation were more concerned with their privacy and confidentiality whilst transacting with
Islamic banks than compared with other education segments. Similarly, respondents having qualification
below matriculation gave more weightage to the variety of financing options being offered by banks,
expertise & professional competence of bank‘s consulting staff/advisor, and friendly & responsive
attitude of bank‘s staff. In ‗occupation‘, public servants took more care of good repute of bank among
commercial banks and friendly & responsive attitude of bank‘s staff. Moreover, people who had recently
joined Islamic banking and had spent only 3-6 months in dealing with Islamic banks were more desirous
of profitability and variety of financial services offered by banks.

CONCLUSIONS AND IMPLICATIONS

The analysis of the items constituting different aspects of customer selection criteria show that there are
two over-riding dimensions i.e. the product features and service quality of Islamic bank, which are highly
regarded by the customers of both Pure Islamic banks and customers of conventional banks with Islamic
Banking branches. This study also found support for the arguments by (Erol and El-Bdour, 1989,
Gerrard and Cunningham, 1997, Zaher and Hassan, 2001) suggesting that religious beliefs are not the
sole reason to select an Islamic bank.

Results of this study indicate that the customers of Islamic banks rank Sharia compliance features of
Islamic Banking services last among other selection criterion they use for selecting an Islamic bank. Core
aspects of financial services offered by Islamic banks are not compatible with the competitive financing
options being offered by conventional banks. Despite of the fact that Islamic banking instruments are
predominantly long-term investment oriented, most of the Islamic Banks are not considering to offer
financing options of long-term nature especially a large segment of public sector employees‘ i-e pension
and saving schemes and to corporate ventures services like long term financing and mortgages. This
would be off assistance in diversifying products and facilities offered by the Islamic banks in Pakistan.
This study also found that employees are not well equipped with religious principles associated with
different financial instruments being offered by Islamic banks. It implies that bank‘s staff should not
only be courteous, attentive and willing to help customers but also capable of demonstrating Sharia
principles that can create association between customer‘s religious motives and investment decision
criterion. This is also felt that there is also need for creating public awareness about the competitive
features of Islamic banking solutions and importance of sharia compliance for making investment
choices. This will later help in developing a unique positioning base to distinguish Islamic banking
offerings from different financial solutions available with conventional interest-based banking.

Managerial implications
The management of Islamic banks must acknowledge that competition with commercial banking
demonstrates a need to consider product features and service quality as equally important to ‗Sharia
compliance‘ in designing the positioning strategy of Islamic banking services. Islamic banking services
should be augmented with value added services like online banking facilities, convenient and accessible
customer support services and an interactive communication system to facilitate their customers‘ needs.
Internal as well as external communication systems should be made compatible to the local conditions of

8
a specific context. Banking terms and conditions, interpretation of Sharia principles related with the
investment and documentation should be made understandable to the customers of Islamic banks as well.

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