An Explorative and Comparative Analysis of Customers’ Perception and Expectations of Service Quality in the Islamic and Conventional Banks of Kuwait and Qatar

Abstract

The fast-moving global banking sector has become highly competitive in order to survive. This includes Islamic banks in the GCC region, which strive to not only thrive, but to insulate themselves from possible regional and global meltdowns. In order to stay ahead of their competition, it is imperative that the services provided to customers are of the highest quality to ensure the optimum level of customer satisfaction, which ultimately results in improved customer loyalty and reduced attrition rate. This research aims to explore, measure and compare the perceived service quality levels of Kuwait and Qatar’s Islamic and conventional banks, based on customers’ perceptions and expectations of perceived service quality. The research presented in this thesis also aims to determine which service quality dimensions make the greatest contribution to overall customer satisfaction. In addition, this study attempts to determine consumers’ awareness level of banking products and services. Utilising a modified version of the SERVQUAL model, this study measures and tests nine service quality dimensions through a questionnaire survey: tangibles, assurance, empathy, reliability, responsiveness, corporate social responsibility, technology, competitiveness and religious compliance. A questionnaire survey was distributed in order to gather data from which 1,082 responses were returned (581 from Qatar and 501 from Kuwait). The empirical findings reveal that customers in conventional banks have higher levels of awareness of banking products and services compared to Islamic banks in Kuwait and Qatar. Furthermore, the findings indicate that all of the banks in the study produced a negative service quality gap (perception minus expectation) for all service quality dimensions, which indicated the expectations of customers were not met. The findings revealed that respondents from Kuwait Islamic and conventional banks are satisfied with the overall service quality based on customers’ perception. However, the opposite is the case for both types of Qatari banks, although it was ‘close’ to satisfaction. Overall, Kuwaiti conventional banks have better service quality scores compared to Islamic banks based on the modified SERVQUAL model dimension gap differences, while in regard to Qatar, Islamic banks have higher service quality than conventional banks. The findings also demonstrate that ‘assurance’, ‘empathy’ and ‘responsiveness’ dimensions scored the highest expectation mean for Qatari and Kuwaiti Islamic and conventional banks, while ‘religious compliance’ and ‘assurance’ dimensions scored a high perception mean for Qatari and Kuwaiti Islamic banks. In regard to Kuwaiti and Qatari conventional banks, ‘assurance’ and ‘technology’ scored the highest mean perception score. Regression analysis shows that ‘assurance’ was found to be the most important predictors of customer satisfaction based on respondents’ perception and expectations for all types of banks in Kuwait. Customers in Qatar rated ‘empathy’ and ‘assurance’ as the most important predictors of customer satisfaction. Furthermore, the study also found that customer demographics have a significant effect on their perception and expectations of service quality in Kuwaiti and Qatari Islamic and conventional banks. The factor analysis revealed that the customers of Islamic and conventional banks reorganize the service quality dimensions into various components differently than the modified SERVQUAL dimensions. For Kuwaiti and Qatari Islamic banks, the customers revealed ‘management, establishment and confidentiality’ to be the highest-ranked service quality component, while for Kuwait conventional banks, ‘customer service’ was found to be the highest-ranked.