Exploring service quality and its impact on customer satisfaction and customer loyalty within Islamic banks in Palestine - from customers perspective

Islamic banks in Palestine are operating in a very competitive environment, considering the existence of other banks that are offering similar products there. Noticeably, the intense competition in the banking industry has resulted from the customers’ expectations of receiving highest services and products. However, there is a lack of evidence on whether compliance with Islamic principles influences the Customer’s satisfaction and loyalty. This study aimed at testing the relationship between CARTER model dimensions, customer satisfaction, and customer loyalty in Palestine’s Islamic banks. CARTER defined as an assessment of quality of service at the Islamic banking business was developed by Othman and Owen (2001) based on the dimensions CARTER, namely: Compliance, Assurance, Reliability, Tangible, Empathy, and Responsiveness. Another significant aim was to analyse the moderating influence of competitive advantage and Islamic compliance. Objectives included examining whether there was a significant correlation between CARTER model dimensions, competitive advantage, customer satisfaction, and customer loyalty among Islamic Banks’ customers in Palestine. Moreover, there was an objective of determining whether competitive advantage and Islamic compliance significantly could moderate the relationship between customer satisfaction and customer loyalty among Islamic Banks’ customers in Palestine. In order to achieve the aims and objectives of the study, SERVQUAL model from Parasuraman et al. (1985) and CARTER from Othman and Owen (2001b) have been adapted. Given that, the research started with an exhaustive review of related literature, while defining the found gap. Finding gaps in literature investigated led to develop the hypotheses of the study. Conducting the methodological study to answer the research questions, meet the aims and objectives of the research and testing the hypotheses was the followed step. The empirical study adopted the quantitative approach, whereas 93 participants have provided with questionnaires to conduct the aimed survey. The questionnaire adopted a 33-items questionnaire from Othman and Owen (2001b). In the process of analysing the answers of the participants, the researcher used SmartPLS (v3.3.3). Accordingly, the findings revealed that only Islamic Compliance and Assurance from the CARTER model and Competitive Advantage were significant. The study concluded that Competitive Advantage moderated the relationship between Customer Satisfaction and Customer Loyalty but not Islamic Compliance. This study has provided a new perspective on customer satisfaction for Islamic banks in Palestine. The study contributed to literature, in particular the researches on Islamic banks, while recommended the enhancement of customer satisfaction understanding. Though there were some limitations in the study, such as small sample size collected of 93 participants and the targeted sample to be 100 participants. One can admit the small sample because of the limits of this study to be in Palestine. However, the study actually, provided a better knowledge to the academicians and the literature of banking concerning customer satisfaction