The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0262-1711.htm
JMD
38,6
442
Received 12 May 2018
Revised 8 September 2018
Accepted 19 February 2019
Journal of Management
Development
Vol. 38 No. 6, 2019
pp. 442-454
© Emerald Publishing Limited
0262-1711
DOI 10.1108/JMD-05-2018-0149
Does service quality increase the
level of banks performance
Comparative analysis between
conventional and Islamic banks
Syed Faraz Ali
Department of Management Sciences, University of Bolton, Bolton, UK, and
Muhammad Naeem
Worcester Business School, University of Worcester, Worcester, UK
Abstract
Purpose – The purpose of this paper is to unfold the relationship between service quality and level of
performance of conventional and Islamic banks. Also, it intends to uncover what are the features of service
quality which can raise the level of performance either in conventional banks or Islamic banks. There is rare
literature available that focused on comparative study between above stated banking systems based on
emerging parameters of SERVQUAL model.
Design/methodology/approach – To meet the objectives of this investigation, research data has been
from 450 customers who have had accounts and dealings with conventional and Islamic banks in the
previous five years. The customers are selected based on cluster sampling from regional offices of
conventional and Islamic banks.
Findings – The collected data have been analyzed by using confirmatory factor analysis (CFA) technique
followed by common method variance (CMV ), multiple regression test and independent sample t-test used to
examine the parameters of service quality in the context of banks performance. The purpose of CFA is to find
the model validity, while multiple regression and t-test is performed in order to examine the influence of
service quality parameters on banks performance.
Originality/value – The study used compliance as a one of the emerging and unique dimension of service
quality. This dimension is rarely investigated in the context of measuring the level of bank performance of
conventional and Islamic banking systems. Findings reveal responsiveness and assurance is the strongest
predictor of conventional banking performance. Compliance and reliability has significant and positive
impact on the level of performance of Islamic banks. Moreover, the study has practical implications for the top
management and stakeholders of conventional and Islamic banks to increase the level of performance by
using SERVQUAL model.
Keywords Service quality, Islamic banks, Conventional banks, Comparative study, Banks performance
Paper type Research paper
Introduction
Given the additional pressures of intensive global competition, changing work environment,
upgraded technology, banks are focusing on the need for improvement in the level of
performance (Aslam et al., 2015; Rehman et al., 2016). Financial and non-financial
constraints, technological breakthroughs, restructuring, privatization, mergers, government
legislation and expanding competitive business markets are raising the pressure for
increasing the level of performance (Aslam et al., 2018; Rehman et al., 2016). For
performance, service quality is known as a prime factor especially in the growth of the
banking sector. The need of current time is to produce defect-free and high-quality services
to increase the numbers of customer and to retain and satisfy customers (Krishna et al.,
2011). Business researchers have been focused on searching techniques that can eliminate
failures proactively and improve product quality and value (Craighead et al., 2004; Hoffman
et al., 2016; Krishna et al., 2011). However, there is no perfect technique found that can help to
provide error-free services at first attempt (Krishna et al., 2011). Although organizations
require both intangible and tangible resources to gain a competitive edge, currently service
oriented and knowledge-based organizations are focused on improving service quality to Conventional
survive. Currently, many dynamic organizations, top managers and consultants are and Islamic
compelled to use service quality to increase the level of banks performance (Zameer et al., banks
2015). The increasing use of advanced and technological tools raises the level of service
quality (Zafar et al., 2011).
In 2013, the services sector contributed about 80 percent of the GDP in the US economy.
During the year 2014–2015, an increase of 58.8 percent was reported in the services sector 443
of Pakistan (Rehman et al., 2016). In the services sector, the banking sector is recognized as
a major contributor to the economy and it is growing in the fast-paced work environment
(Aslam et al., 2018). Banks are focused on constantly updating and innovating technology
to provide reliable, convenient and expedient services to their valuable customers
(Aslam et al., 2018, 2015). Moreover, to expand and capture the maximum shares of the
banking sector, the majority of banks are interested in investing in the improvement of
service quality dimensions and levels of performance. Every financial institution has the
prime target to achieve high levels of growth and surpass the competitors to obtain
financial advantages (Muqadas et al., 2017). This trend is universal among banks, those
setting targets in the banking sector at the global level try to achieve these targets with
the application of novel techniques and gadgets to sustain their competitive edge across
the world (Liao et al., 2016).
The twenty-first century is recognized as a combination of various opportunities and
threats especially for the banking sector due to the start of Islamic banking in Asian countries.
State bank of Pakistan launched Islamic banking practices in 2000 in Pakistan. In 2002,
Meezan bank was registered as a first Islamic bank operating its business functions according
to Sharia’h given by Allah Almighty (Ahmad et al., 2010). Islamic banks have many good
opportunities in Asian countries because they have more than an 80-percent Muslim
population. In the banking sector, there are two different banking systems operating which
are known as conventional and Islamic banks (Erol et al., 1990). Conventional and Islamic
banks can be differentiated based on Riba and risk sharing practices. In Islamic banking,
profit can be varied and risk is shared among lenders, borrowers and the bank. However,
profit is certain and risk must be shared with borrowers in the conventional banking system
(Ahmad et al., 2010). Other researchers have stated that Islamic banking is not interest-free
and deposits of Islamic banks somewhat used in conventional banks (Chong and Liu, 2009).
Researchers have reported that 25 percent of Islamic banks have opened in those
western countries where Muslims are minorities (Pollard and Samers, 2007). According to
Abdul-Rehman (2012), Islamic banks have achieved significant growth both in western and
Islamic countries. By using cross cultural comparison, researchers stated that many religious
customers have shifted from conventional to Islamic banks due to the Muslim religious
bindings. Amat-Taap et al. (2011) have found that many conventional banks have opened
their subsidiaries to attract those customers who are less interested in an interest based
banking system. Haque (2010) has conducted a study by selecting respondents from several
countries (i.e. Chinese, Malays and Indians) and he found that 48 percent of the respondents
have accounts in Islamic banks.
Previous research on the service quality dimensions cover its interrelationship with,
customer loyalty (Asiah Omar and Musa, 2011), customer satisfaction (Cameran et al., 2010),
repurchase intention (Olaru et al., 2008), marketing segmentation (Okumuş and YAŞİN,
2007), buying behavior (Sánchez Pérez, 2007), customer perceived value (Zameer et al., 2015),
business performance (Melo et al., 2017), commercial banks performance (Suvittawat, 2015)
and various practical implications for many industries. However, the authors of the present
research have not found comparative studies on service quality dimensions and banks
performance in the perspective of conventional and Islamic banks. Therefore, this study is
an addition to existing literature with a new emerging service quality dimension
JMD (i.e. compliance). The study is an attempt to formulate and test the model of banking
38,6 performance based on service quality aspects in the context of Islamic and conventional
banks practices. There is scant research data available which attempts to investigate the
comparative analysis of service quality in Islamic and conventional banking specifically in
the perspective of a developing country which has become second highest country to follow
the Islamic religious practices. It is found that personal initiative, work complexities, control
444 at work and measures to increase the level of performance are lower in Asia compared to the
West (Aslam et al., 2015; Rehman et al., 2016). Furthermore, Asian culture is based on
collectivism, power distance, authority, control and political influence. It is also found that
antecedents of service quality and performance level vary in organizations, cultures and
nations. The users may be impressed with the tangible products of some of the banking
sector organizations but may be getting the frustration with same products from different
banks. Some users also show their reservation on service value by paying more interest rate
than expectations. Using the results of this study, the banking sector can use an optimal mix
of different combat features that can be varied from client to client as per the diverse
features based on the risk associated with the industry they belong to.

Literature review
The researchers of service management are focused on acquiring knowledge and making new
strategies to increase the level of performance and retain existing customers by enhancing the
level of service quality (Fisk et al., 2012; Rehman et al., 2016). The current need is to produce
defect-free and high-quality services to retain customers and enhance positive service reviews,
word of mouth, viral marketing and social influence (Krishna et al., 2011; Melo et al., 2017).
Customers’ perception, experience, service review, and service engagement have become
essential to raise the level of service quality. At present, many leading organizations, strategic
managers and practitioners are compelled to use the best emerging parameters of service
quality to increase the level of banks performance (Zameer et al., 2015). When organizations
focus on successful parameters of service quality then they can increase customer trust,
engagement, retention ratio, word of mouth and the level of performance (Rehman et al., 2016;
Morrisson and Huppertz, 2010). A satisfied customer can be helpful for firms because he/she
can create positive social influence to attract new customer.
Some studies have documented that customers do not always want to complain when they
experience a service failure (Krishna et al., 2011; Tax and Brown, 1998), however they can
change their service provider due to the low level of service quality. Therefore, it has become
reality that customers switch frequently from one service provider to another due to poor
levels of service quality (Wieringa and Verhoef, 2007). According to Maxham and Netemeyer
(2002), customer complaints regarding service quality have increased compared to the 1990s.
It has been found that in the service sector 56 percent of customers’ experienced various kinds
of services failure (Krishna et al., 2011). Moreover, it has been found that below 50 percent of
complaints received a satisfactory reply and most of the complaints handling are
unsatisfactory because of rudeness and high response time (Andreassen, 2001). On the other
hand, researchers have reported that only 30 percent of customers are happy with the efforts
of customer service and complaint handling (Michel and Meuter, 2008). The service providers
are unable to eliminate those complaints at the first attempt, only they have to improve the
service quality and how effectively those complaints can be addressed within the prescribed
deadlines. Thus, it is important to investigate what the service quality dimensions are that can
increase performance in conventional and Islamic banks.
Service management data have highlighted the importance of various factors that can
positively or negatively influence service recovery time (Hoffman et al., 2016). Those factors
that have been brought to attention include the causes and consequences of failure (Stewart
and Chase, 1999; Muqadas et al., 2016), antecedents of recovery (Hoffman et al., 1995), the
stages and time required for recovery (Tax and Brown, 1998) and activities required during Conventional
the recovery process (Hoffman et al., 2016). In services management, service failure has been and Islamic
investigated by identifying: how customers thinking varies over time (Maxham and banks
Netemeyer, 2002); how customers can react to various levels of severity issues (Smith and
Bolton, 1998); in which situations customers can switch and experience the service failure
(Maxham and Netemeyer, 2002); and the recovery paradox (Maxham, 2001). Bitner et al. (1990)
reported the process of recovery: problem acknowledgment, explains the causes, apology 445
where suitable and compensation for service failure. It is not necessary that services failures
should result in negative results as long as effective strategies are made to minimize the
response time to customers. However, service providers are facing situations where customers
are dissatisfied and believe that services recovery strategies are not up-to-the-mark (Maxham
and Netemeyer, 2002). The main challenge for the supplier is to effective time allocation as per
the failure situations of that product/service (Wirtz and Mattila, 2004). Researchers believed
that customers’ dissatisfaction or intention to quit occurred due to response time, rather than
the damage itself (Hoffman et al., 1995, 2016). There are mixed comments found in the
literature regarding the services quality of Islamic banks. Jun and Palacios (2016) found the
lack of responsiveness, empathy, and tangibles in Islamic banks. However, few studies have
indicated responsiveness, empathy, and tangibles are high in Islamic banks (Ahmad et al.,
2010; Abdul Rehman, 2012). Another study has revealed the strong association between
service quality dimensions and customer loyalty in Islamic banks (Kashif et al., 2015).
However, there is limited literature available which attempts to investigate the comparative
analysis of service quality in between Islamic and conventional banks in Pakistan.
Othman and Owen (2001) are the pioneer researchers who have extended the model of
SERVQUAL by adding the compliance dimension to measure customer service quality in
the context of Islamic banks. According to Amat-Taap et al. (2011), service quality
dimensions (i.e. convenience and competence) can decrease the level of service quality gap
up to 85 percent in Islamic banks and 72 percent in conventional banks. However, they have
completed a comparison based on levels of customer satisfaction with a small and unequal
sample size of respondents from conventional and Islamic banks in Malaysia. Furthermore,
they have conducted this study based on the four dimensions of service quality (tangibility,
reliability, competence and convenience) and ignored the other two important dimensions of
service quality. Another study has presented the comparison between conventional and
Islamic banks based on the level of customer satisfaction (Mohd-shariff and Aniza, 2013).
But researchers have argued that there is no difference between the service quality of
conventional and Islamic banks and both offer very poor levels of service quality in
Malaysia. A research study has been conducted to compare the level of services quality
based on the level of customer satisfaction in Pakistan (Ahmad et al., 2010), but their data
analysis technique is questionable because they have used correlation and regression
results for comparison purposes. Abdul-Rehman (2012) has completed a comparison of
service quality by using only Meezan Bank (75 respondents) and level of customer
satisfaction in Pakistan. Therefore, this study has motivation to conduct a comparison of
service quality by using a significant sample size and level of banks performance of
conventional and Islamic banks. Based on the above-given discussion, the study has
developed the following set of hypotheses.

Research hypotheses
H1. Compliance dimension of service quality has a positive impact on the level of
performance for both conventional and Islamic banking.
H2. Responsiveness dimension of service quality has a positive influence on the level of
performance for both conventional and Islamic banking.
JMD H3. Reliability dimension of service quality has a positive impact on the level of
38,6 performance for both conventional and Islamic banking.
H4. Assurance dimension of service quality has a positive influence on the level of
performance for both conventional and Islamic banking.
H5. Tangibles dimension of service quality has a positive impact on the level of
446 performance for both conventional and Islamic banking.
H6. Empathy dimension of service quality has a positive influence on the level of
performance for both conventional and Islamic banking (Figure 1).

Research methodology
Research philosophy and design
This research study is based on the assumptions of a positivistic approach that supports
deductive reasoning to construct and test the proposed hypotheses. The present study has
followed the explanatory research design that supports examining the cause and effect
relationship in proposed hypotheses using self-administered questionnaires. The current
study categorized under the umbrella of explanatory research design as this study measures
the cause and effect of proposed relationships in research model. Furthermore, the research
categorized as cross-sectional with respect to time horizon because cross-sectional research
gives the edge of time, cost and effectiveness of responses regarding particular relationship
(Kim, 2003; Muqadas et al., 2016).

Population
Around the globe, the services sector is rapidly increasing its share of the overall economy
(Muqadas et al., 2017). Likewise, a similar trend observed in the services sector of developing
nations like Pakistan. According to Aslam et al. (2018), the service sector contributed
approximate 47 percent in overall GDP of the Pakistan economy. In the services sector, the
banking sector has been given major attention due to upgraded technology, online banking
services, stiff business competition and huge market share (Aslam et al., 2015). For data
collection, the top six famous banks from conventional and Islamic banks are selected from
Lahore by using cluster sampling technique. These banks are the Muslim commercial bank
limited, Allied bank limited, United bank limited, Meezan Bank Limited, Bank Alfalah
Islamic, Askari Bank Ltd. These banks are selected based on the business volumes level

Conventional
Compliance
Banking system
+

Responsiveness
+

Reliability Level of perceived

+ Performance
+
Assurance
+

Tangibles
Islamic Banking
+ system
Figure 1.
Research model Empathy
(i.e. high business volumes, medium business volumes, and low business volumes). The data Conventional
regarding the number of customers have been taken from the concerned departments of and Islamic
these conventional and Islamic banks. banks
Sample
To ensure a valid and unbiased analysis, the sample size is one crucial factor (Hair, 2010).
Determining sample can raise the issue because samples that are too large may take more 447
resources, money, and time, while samples that are too small may lead to inaccurate results.
The researcher has to focus on population size, confidence interval, and standard deviation
before selecting a sample for study (Al-Subaihi, 2003). Approximately 12,556 customers are
selected who are account holders of conventional and Islamic banks of Lahore region. An
online sample calculator has been used, and it has extracted a 450 sample size. Simple
random sampling has been used to select 450 account holders from a sampling frame. Out of
450, 225 self-administered questionnaires have been distributed to account holders of
conventional banks, and the remaining 225 questionnaires have given to the account
holders of Islamic sector banks.

Instrumentation
The self-administered questionnaire is one of the most popular data collection methods in
empirical studies. The questionnaires have been taken from well-reputed studies. All the
measures (other than the control variables) have used a five-point scale ranging from
“strongly disagree” (1) to “strongly agree” (5). This study has used the adapted
SERVQUAL scale of Ali and Raza (2017). The reason to choose this scale is one of the new
emerging dimensions (e.g. compliance) of service quality. The SERVQUAL scale has six
dimensions which are compliance, responsiveness, reliability, empathy, assurance,
tangibles and empathy. To measure the level of bank performance, the scale has adopted
from previous studies (Gueutal et al., 1984; Igbaria and Tan, 1997) and adapted to achieve
the objectives of current study. We have used this scale based on the numerous indicators
of performance such as efficiency, effectiveness, sales and profit margin. Finally, the pilot
study has been conducted to examine the reliability values and it is found that the items of
scales have good reliability as per the acceptable standard which is 0.7 (Hair, 2006).
We have selected those customers who have accounts in both conventional and Islamic
banks from many years. Some of the customers have retired from high designations and
they deposited their money in Islamic banks due to interest free practices. During data
collection, some of the selected customers also informed us that they have shifted their
bank accounts from conventional to Islamic banks due to interest-based practices
(prohibited in Islam) of conventional banks.

Results
Confirmatory factor analysis (CFA)
Confirmatory factor analysis was implemented to make sure the instrument is valid.
According to Hoyle for further analysis the suitability of the model is essential, which can be
confirmed through confirmatory factor analysis. To execute CFA McArdle (1996) guidelines
have been followed as these are most suitable for elaborating the appropriateness of the
model (See Table I), adjusting it to fit indices as per Kline (2005) standards.

Descriptive results
The mean values of both conventional and Islamic banks have depicted the ranges from
neutral to agree. Furthermore, the standard deviation values have exhibited the normal
deviation closer to mean. Pearson correlation test has been applied to examine the strength
JMD Particulars CMIN/df GFI CFI TLI AGFI RMSEA
38,6
Conventional banks
Propose model 2.739 0.911 0.913 0.923 0.937 0.057
Alternative model 3.376 0.734 0.676 0.669 0.818 0.095
Threshold values CMIN/dfo 3 GFIW0.90 CFIW 0.90 TLIW0.90 AGFIW0.90 RMSEAo0.08

448 Islamic banks

Propose model 2.939 0.901 0.926 0.907 0.912 0.068
Alternative model 4.161 0.811 0.722 0.821 0.835 0.099
Threshold values CMIN/dfo 3 GFIW0.90 CFIW 0.90 TLIW0.90 AGFIW0.90 RMSEAo0.08
Table I. Notes: CMIN/df: GFI, Goodness of fit index; CFI, comparative fit index; TLI, Tucker-Lewis index; AGFI,
CFA results adjusted goodness of fit index; RMSEA, root mean square of error approximation

of the relationship between variables used for this study. The correlation values showed
that there is a strong relationship found among responsiveness, assurance, reliability,
compliance and banks performance.

Validity and reliability analysis

According to Hair (2010) the results of discriminant and convergent results are obtained
through the use of various procedures. Internal consistency, according to their suggestions,
of structured questions is only satisfactory when the acceptable value of convergent validity
is (AVE W 0.50; and CR W 0.70; while when MSV o AVE and ASV o AVE, then
discriminant validity can be obtained. Results reveal that all benchmarks of convergent,
discriminant and reliability validities are determined.

Common method variance (CMV )

Two statistical tests are employed for removing CMV. Initially, common latent factor is used
that is better and stronger in comparison to the single factor test of Harman. Moreover,
findings also reveal that 17 percent showed variance among questions regarding the study’s
constructs. Podsakoff et al. (2003) recognized the restrictions of the common latent factor,
thus by using marker variable CVM has been taken out that is found to be a more effective
technique (Williams et al., 2010). In the current study, CVM is not the problem in the data set
and that shared variance has been reduced to 5 percent.

Multiple regression technique

Multiple regression technique is applied to compare the β and t-values of conventional and
Islamic banks. In Table II, the results indicate that responsiveness and assurance are the
most appropriate dimensions of service quality in conventional banks. However,
compliance and reliability are more effective for the customers of Islamic banks. These
results show that it is not essential that the service quality dimensions remained the same
within the same sector.

Independent sample t-test

The independent sample t-test has been used to compare the means of independent samples.
In this study, researchers aim to examine whether service quality dimensions have equal or
higher effects on the level of banks performance of conventional and Islamic banks. Table III
shows that responsiveness and assurance mean values are higher in conventional banks. On
the other hand, compliance and reliability are found appropriate for customers of Islamic
banks. These results are useful for policymakers to increase the level of banks performance
as per the needs of their valuable customers.
 Banks performance
Conventional
β coefficients t-value and Islamic
Constructs Convent. banks Islamic banks Convent. banks Islamic banks banks
Compliance 0.210 0.404 2.37** 4.16**
Responsiveness 0.352 0.276 3.84** 2.75*
Reliability 0.153 0.373 2.10* 3.66**
Assurance 0.310 0.142 3.45** 2.09* 449
Tangibles 0.178 0.175 2.19* 2.13*
Empathy 0.117 0.108 2.03* 2.01*
R2 0.494
Adjusted R2 0.475 Table II.
F-value 117.45 Multiple regression
Notes: *,**Significant at 0.05 and 0.01 levels, respectively results

Banks performance
Mean values t-value
Constructs Convent. banks Islamic banks Convent. banks Islamic banks

Compliance 18.10 29.53 2.72* 3.98**

Responsiveness 28.33 21.90 3.83** 2.97**
Reliability 16.10 25.71 2.92* 3.48**
Assurance 26.12 13.90 3.28** 2.27*
Tangibles 12.14 12.01 2.12* 2.18* Table III.
Empathy 11.18 10.95 2.06* 2.00* Independent sample
Notes: *,**Significant at 0.05 and 0.01 levels, respectively t-test results

Discussion
Customers perception, expectation, service reviews, level of service quality and level of
performance vary between developed to developing country, culture to culture, sector to
sector and organization to organization (Aslam et al., 2018; Rehman et al., 2016). The study
has addressed the shortcoming of previous comparative studies which have used
service quality model for comparison purpose in the perspective of dual banking system
(Amat-Taap et al., 2011; Ahmad et al., 2010; Mohd-shariff and Aniza, 2013; Abdul-Rehman,
2012). According to a recent news and development, Pakistan has become a second Islamic
religious country after Saudi Arabia. Therefore, Islamic banking practices and level of
service quality should be evaluated based on the perceptions and expectations of bank
account holders in Pakistan. The current research investigates the varying service quality
dimensions in the perspective of conventional and Islamic banking system. Moreover, the
study examined the impact of service quality dimensions to predict the level of banks
performance in conventional and Islamic banks of an under-researched country, like
Pakistan. During the course of this research, the authors of this study were unable to find a
single comparative study on above stated proposed relationships. To ensure the validity of
the instrument, CFA was applied. Convergent and discriminant statistics results are
achieved after using different procedures of Hair (2010). The shared variance has reduced
down to 5 percent and CMV is not the issue in the data set of this study.
Research data have been gathered from 450 customers who have accounts and dealings
with conventional and Islamic banks in the previous five years. The study used compliance
as a one of the emerging and unique dimension of service quality. This dimension is rarely
investigated in the context of measuring the level of banks performance of conventional and
JMD Islamic banking systems. There are mixed comments found in literature regarding the
38,6 services quality of Islamic banks. Jun and Palacios (2016) found the lack of responsiveness,
empathy and tangibles in Islamic banks. However, few studies have indicated
responsiveness, empathy and tangibles are high in Islamic banks (Ahmad et al., 2010;
Abdul Rehman, 2012). Another study has been revealed the strong association between
service quality dimensions and customers loyalty in Islamic banks (Kashif et al., 2015).
450 However, there is limited literature available which attempts to investigate the comparative
analysis of service quality in between Islamic and conventional banking of a developing
country. Multiple regression technique is applied to compare the β-value and t-value of
conventional and Islamic sector banks. Findings indicated responsiveness and assurance
are the most appropriate dimensions of service quality in conventional banks. However,
compliance and reliability are more effective for the customers of Islamic banks.

Conclusion
High level of customer service and service quality can enhance the level of banks
performance, customers positive perception, service reviews, service engagement, social
influence, word of mouth and customer loyalty. This study has tested a SERVQUAL
research model that accomplished an aim to determine appropriate service quality
dimensions in dual banking system that have differences in organizational culture, practices
and policies. There is rare literature available that focused on comparative analysis of
conventional and Islamic banks based on emerging parameters of SERVQUAL model and
the level of performance of dual banking system especially in the context of a developing
country. The study used compliance as an emerging and unique dimension of service
quality and it is found that it is rarely investigated in comparative studies to measure the
level of bank performance of conventional and Islamic banks. Service quality dimensions
such as responsiveness and assurance are found to be appropriate in a supportive culture of
conventional banks. A supportive culture is friendly, helpful, harmonious, fair, open,
trusting, safe, sociable, encouraging and collaborative with all stakeholders. On the other
hand, compliance and reliability are found to be more suitable to the culture of Islamic
banks. These results are shown that it is not essential that the service quality dimensions
remained same within the same sector. Findings have been highlighted that responsiveness
and assurance are more important for the account holders of conventional banks while
reliability and compliance are attracted the attention of customers of Islamic banks.

Implications
Previous studies have investigated the relationship among service quality dimensions and
commercial banks performance (Suvittawat, 2015), customer satisfaction (Ali and Raza,
2017; Ahmad et al., 2010), customer behavioral intention (Rehman et al., 2016), customer
perceived value (Zameer et al., 2015), business performance (Melo et al., 2017). However,
authors of present research have not found comparative studies on service quality
dimensions and banks performance in the context of the conventional and Islamic banking
system. Therefore, this study is an addition to existing literature with a new emerging
service quality dimension (i.e. compliance). Compliance is a very important factor in service
quality to improve the banks’ performance especially in Islamic the banking system. At
present, many dynamic organizations, top managers and consultants are compelled to use
the service quality to increase the level of banks performance. Conventional and Islamic
banking systems are differentiated based Riba and risk sharing practices. In conventional
banking, profit is varying and risk is shared among lenders, borrowers, and bank. However,
profit is certain and risk is shared with borrowers in conventional banking system.
However, other researchers have stated that Islamic the banking is not interest-free and
Islamic deposits are somewhat used as a conventional banking deposits. Results of this
study are beneficial and useful for top management to improve the services level of banks as Conventional
per the expectations of their valuable customers. The study results are indicated that how and Islamic
responsiveness and quality assurance can increase the banks performance as well as banks
customers’ expectations regarding good service quality. On the other hand, Islamic banks
follow strict Sharia compliance procedures, specifically the prohibition of taking or giving
interest and loss sharing by both parties. Therefore, customers of Islamic banks are
preferred compliance to improve the level of performance. 451
Limitations and future directions
The study has confined itself to one sector and data were only collected from the
conventional and Islamic banks of the Lahore region. In future studies, a combination of
various data collection techniques and data collection from different sectors can provide a
more rich description regarding the comparative analysis of service quality dimensions.
It has been found that participants opinion for initial survey questions may be negatively
impacted to the generalizability of results as suggested by previous studies (Aslam et al.,
2017, 2016). Also, they have suggested to use a probability sampling and data collection
from different sources with the purpose to address generalizability issues.

References
Abdul Rehman, A. (2012), “Customer satisfaction and service quality in Islamic banking: a comparative
study in Pakistan, United Arab Emirates and United Kingdom”, Qualitative Research in
Financial Markets, Vol. 4 Nos 2/3, pp. 165-175.
Ahmad, A., ur Rehman, K. and Saif, M.I. (2010), “Islamic the banking experience of Pakistan:
comparison between Islamic and conventional banks”, International Journal of Business and
Management, Vol. 5 No. 2, pp. 137-143.
Ali, M. and Raza, S.A. (2017), “Service quality perception and customer satisfaction in Islamic banks of
Pakistan: the modified SERVQUAL model”, Total Quality Management and Business Excellence,
Vol. 28 Nos 5/6, pp. 559-577.
Al-Subaihi, A.A. (2003), “Sample size determination: influencing factors and calculation strategies for
survey research”, Saudi Medical Journal, Vol. 24 No. 4, pp. 323-330.
Amat Taap, M., Choy Chong, S., Kumar, M. and Kee Fong, T. (2011), “Measuring service quality of
conventional and Islamic banks: a comparative analysis”, International Journal of Quality &
Reliability Management, Vol. 28 No. 8, pp. 822-840.
Andreassen, T.W. (2001), “From disgust to delight do customers hold a grudge?”, Journal of Service
Research, Vol. 4 No. 1, pp. 39-49.
Asiah Omar, N. and Musa, R. (2011), “Measuring service quality in retail loyalty programmes
(LPSQual): implications for retailers’ retention strategies”, International Journal of Retail &
Distribution Management, Vol. 39 No. 10, pp. 759-784, available at: https://doi.org/10.1108/
09590551111162257
Aslam, U., Arfeen, M., Mohti, W. and Rahman, U.U. (2015), “Organizational cynicism and its impact on
privatization (evidence from federal government agency of Pakistan)”, Transforming
Government: People, Process and Policy, Vol. 9 No. 4, pp. 401-425.
Aslam, U., Arfeen, M.I., Mohti, W. and Imran, M.K. (2017), “Impact of personality traits and context on
employees’ job outcomes”, Pakistan Business Review, Vol. 17 No. 3, pp. 603-623.
Aslam, U., Muqadas, F., Imran, M.K. and Saboor, A. (2018), “Emerging organizational parameters and
their roles in implementation of organizational change”, Journal of Organizational Change
Management, Vol. 31 No. 5, pp. 1084-1104.
Aslam, U., Rehman, M., Imran, M.K. and Muqadas, F. (2016), “The impact of teacher qualifications and
experience on student satisfaction: a mediating and moderating research model”, Pakistan
Journal of Commerce and Social Sciences (PJCSS), Vol. 10 No. 3, pp. 505-524.
JMD Bitner, M.J., Booms, B.H. and Tetreault, M.S. (1990), “The service encounter: diagnosing favorable and
38,6 unfavorable incidents”, The Journal of Marketing, Vol. 54 No. 1, pp. 71-84.
Cameran, M., Moizer, P. and Pettinicchio, A. (2010), “Customer satisfaction, corporate image, and service
quality in professional services”, The Service Industries Journal, Vol. 30 No. 3, pp. 421-435.
Chong, B.S. and Liu, M.H. (2009), “Islamic banking: interest-free or interest-based?”, Pacific-Basin
Finance Journal, Vol. 17 No. 1, pp. 125-144.
452 Craighead, C.W., Karwan, K.R. and Miller, J.L. (2004), “The effects of severity of failure and customer
loyalty on service recovery strategies”, Production and Operations Management, Vol. 13 No. 4,
pp. 307-321.
Erol, C., Kaynak, E. and Radi, E.B. (1990), “Conventional and Islamic banks: patronage behaviour of
Jordanian customers”, International Journal of Bank Marketing, Vol. 8 No. 4, pp. 25-35.
Fisk, R.P., Grove, S.J. and John, J. (2012), Services Marketing Self-Portraits: Introspections, Reflections,
and Glimpses from the Experts, Marketing Classics Press, Decatur, GA.
Gueutal, H.G., Surprenant, N. and Bubeck, K. (1984), “Effectively utilizing computer-aided
design technology: the role of individual difference variables”, ICIS 1984 Proceedings,
p. 13, available at: http://aisel.aisnet.org/icis1984/13
Hair, J.F. (2006), Multivariate Data Analysis, Pearson Education, Delhi.
Hair, J.F. (2010), Multivariate Data Analysis, Prentice Hall, Upper Saddle River, NJ.
Haque, A. (2010), “Islamic banking in Malaysia: a study of attitudinal differences of Malaysian
customers”, European Journal of Economics, Finance and Administrative Sciences, Vol. 18 No. 18,
pp. 7-18.
Hoffman, K.D., Kelley, S.W. and Rotalsky, H.M. (1995), “Tracking service failures and employee
recovery efforts”, Journal of Services Marketing, Vol. 9 No. 2, pp. 49-61.
Hoffman, K.D., Kelley, S.W. and Rotalsky, H.M. (2016), “Retrospective: tracking service failures and
employee recovery efforts”, Journal of Services Marketing, Vol. 30 No. 1, pp. 7-10.
Igbaria, M. and Tan, M. (1997), “The consequences of information technology acceptance on
subsequent individual performance”, Information & Management, Vol. 32 No. 3, pp. 113-121.
Jun, M. and Palacios, S. (2016), “Examining the key dimensions of mobile banking service quality: an
exploratory study”, International Journal of Bank Marketing, Vol. 34 No. 3, pp. 307-326.
Kashif, M., Wan Shukran, S.S., Rehman, M.A. and Sarifuddin, S. (2015), “Customer satisfaction and
loyalty in Malaysian Islamic banks: a PAKSERV investigation”, International Journal of Bank
Marketing, Vol. 33 No. 1, pp. 23-40.
Kim, S.K.S. (2003), “Research paradigms in organizational research paradigms in organizational
learning and performance: learning and performance: competing modes of inquiry competing
modes of inquiry”, Information Technology, Learning, and Performance Journal, Vol. 21 No. 1,
pp. 9-18.
Kline, R.B. (2005), “Methodology in the social sciences”, Principles and Practice of Structural Equation
Modeling, 2nd ed., Guilford Press, New York, NY.
Krishna, A., Dangayach, G.S. and Jain, R. (2011), “Service failure and recovery: comparison between
health care and automobile service station”, No. 184, School of Doctoral Studies European Union.
Liao, C., Huang, Y.J. and Hsieh, T.H. (2016), “Factors influencing internet the banking adoption”, Social
Behaviour and Personality: An International Journal, Vol. 44 No. 9, pp. 1443-1455.
McArdle, J.J. (1996), “Current directions in structural factor analysis”, Current Directions in
Psychological Science, Vol. 5 No. 1, pp. 11-18.
Maxham, J.G. (2001), “Service recovery’s influence on consumer satisfaction, positive word-of-mouth,
and purchase intentions”, Journal of Business Research, Vol. 54 No. 1, pp. 11-24.
Maxham, J.G. and Netemeyer, R.G. (2002), “Modeling customer perceptions of complaint handling over
time: the effects of perceived justice on satisfaction and intent”, Journal of Retailing, Vol. 78 No. 4,
pp. 239-252.
Melo, A.J., Hernández-Maestro, R.M. and Muñoz-Gallego, P.A. (2017), “Service quality perceptions, Conventional
online visibility, and business performance in rural lodging establishments”, Journal of Travel and Islamic
Research, Vol. 56 No. 2, pp. 250-262.
banks
Michel, S. and Meuter, M.L. (2008), “The service recovery paradox: true but overrated?”, International
Journal of Service Industry Management, Vol. 19 No. 4, pp. 441-457.
Mohd-Shariff, R.O.S. and Aniza, B. (2013), “Service quality in Islamic and conventional banks in
Malaysia: an explorative and comparative analysis”, doctoral dissertation, Durham University, 453
Durham.
Morrisson, O. and Huppertz, J.W. (2010), “External equity, loyalty program membership, and service
recovery”, Journal of Services Marketing, Vol. 24 No. 3, pp. 244-254.
Muqadas, F., Ilyas, M. and Aslam, U. (2016), “Antecedents of knowledge sharing and its impact
on employees’ creativity and work performance”, Pakistan Business Review, Vol. 18 No. 3,
pp. 655-674.
Muqadas, F., Rehman, M., Aslam, U. and Ur-Rahman, U. (2017), “Exploring the challenges, trends and
issues for knowledge sharing: a study on employees in public sector universities”, VINE Journal
of Information and Knowledge Management Systems, Vol. 47 No. 1, pp. 2-15.
Okumuş, A. and YAŞİN, A.G.B. (2007), “Yapı market müşterilerinin hizmet kalitesi değerlendirmelerine
göre pazar bölümlerinin incelenmesi”, Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi
Dergisi, No. 28.
Olaru, D., Purchase, S. and Peterson, N. (2008), “From customer value to repurchase intentions and
recommendations”, Journal of Business & Industrial Marketing, Vol. 23 No. 8, pp. 554-565.
Othman, A. and Owen, L. (2001), “Adopting and measuring customer service quality (SQ) in Islamic
banks: a case study in Kuwait finance house”, International Journal of Islamic Financial Services,
Vol. 3 No. 1, pp. 1-26.
Podsakoff, P.M., MacKenzie, S.B., Lee, J.Y. and Podsakoff, N.P. (2003), “Common method biases in
behavioral research: a critical review of the literature and recommended remedies”, Journal of
Applied Psychology, Vol. 88 No. 5, pp. 879-903.
Pollard, J. and Samers, M. (2007), “Islamic banking and finance: postcolonial political economy and the
decentring of economic geography”, Transactions of the Institute of British Geographers, Vol. 32
No. 3, pp. 313-330.
Rehman, U.U., Ilyas, M., Aslam, U. and Imran, M.K. (2016), “Service quality dimensions and its impact
on customer’s behavioural intentions”, Pakistan Business Review, Vol. 18 No. 1, pp. 120-139.
Sánchez Pérez, M., Carlos Gázquez Abad, J., María Marín Carrillo, G. and Sánchez Fernández, R. (2007),
“Effects of service quality dimensions on behavioural purchase intentions: a study in public-
sector transport”, Managing Service Quality: An International Journal, Vol. 17 No. 2, pp. 134-151.
Smith, A.K. and Bolton, R.N. (1998), “An experimental investigation of customer reactions to
service failure and recovery encounters paradox or peril?”, Journal of Service Research, Vol. 1
No. 1, pp. 65-81.
Stewart, D.M. and Chase, R.B. (1999), “The impact of human error on delivering service quality”,
Production and Operations Management, Vol. 8 No. 3, pp. 240-263.
Suvittawat, A. (2015), “Service quality at Thailand’s Siam commercial bank: Chonburi province”,
International Journal of Economic Perspectives, Vol. 9 No. 4, pp. 21-26.
Tax, S.S. and Brown, S.W. (1998), “Recovering and learning from service failure”, MIT Sloan
Management Review, Vol. 40 No. 1, pp. 75-88.
Wieringa, J.E. and Verhoef, P.C. (2007), “Understanding customer switching behavior in a liberalizing
service market an exploratory study”, Journal of Service Research, Vol. 10 No. 2, pp. 174-186.
Williams, L.J., Hartman, N. and Cavazotte, F. (2010), “Method variance and marker variables: a review
and comprehensive CFA marker technique”, Organizational Research Methods, Vol. 13 No. 3,
pp. 477-514.
JMD Wirtz, J. and Mattila, A.S. (2004), “Consumer responses to compensation, speed of recovery and
38,6 apology after a service failure”, International Journal of Service Industry Management, Vol. 15
No. 2, pp. 150-166.
Zafar, M., Zaheer, A. and ur Rehman, K. (2011), “Impact of online service quality on customer
satisfaction in the banking sector of Pakistan”, African Journal of Business Management, Vol. 5
No. 30, pp. 11786-11793.
Zameer, H., Tara, A., Kausar, U. and Mohsin, A. (2015), “Impact of service quality, corporate image and
454 customer satisfaction towards customers’ perceived value in the banking sector in Pakistan”,
International Journal of Bank Marketing, Vol. 33 No. 4, pp. 442-456.

Further reading
Byrne, B.M. (2013), Structural Equation Modeling with AMOS: Basic Concepts, Applications, and
Programming, Routledge, Abingdon-on-Thames.

Corresponding author
Muhammad Naeem can be contacted at: dr.muhammadnaeem222@gmail.com

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com
Reproduced with permission of copyright owner. Further
reproduction prohibited without permission.