EXPLORING SERVICE QUALITY IN THE ISLAMIC BANKING INDUSTRY IN KUWAIT: ANALYSIS OF CUSTOMER PERCEPTIONS

Service quality management is an important organizational factor, through which organizations differentiate themselves, compete, and take the lead in the marketplace. It is even more challenging for banks and financial services which, by and large, offer products and services that are difficult for customers to differentiate. Improvements in service quality are expected to increase customer satisfaction, which, in turn, will increase the banks’ ability to retain their customers, broaden their market share, and increase profitability. This study, hence, is an attempt to measure the perceived service quality of three Islamic banks in Kuwait; Kuwait Finance House, Kuwait International Bank, and Boubyan Bank. Additional dimensions are added to the service quality model (SERVQUAL) to measure the perceived service quality and the customers’ perceptions. Dimensions such as; Shari’ah compliancy, the competitiveness between Islamic banks in Kuwait, the technology factors, and the general customer satisfaction were incorporated to the respective model. The study aims to identify those dimensions that influence the level of customers’ perceptions in the sampled banks, examine the effect of service quality on customer satisfaction and assess the correlation between the Islamic banking variables and the SERQUAL dimensions. To attain these aims the study utilized a sample of 700 responses across the three Islamic banks. The study findings demonstrate an above-average level of satisfaction among the Islamic banks’ customers. ‘Compliance’, ‘empathy’, and ‘assurance’ were the most important dimensions as perceived by the Islamic banks customers in Kuwait. The results showed a significant relationship between customer satisfaction and some of the modified SERVQUAL dimensions namely; ‘empathy’, ‘assurance’, ‘compliance’, and ‘competitiveness’. The study also found that demographic factors have significant effect on the perceptions of service quality in Kuwaiti Islamic banks. Based on these results and findings, it could be concluded that in Kuwaiti Islamic banks customers are satisfied with the quality of services depending on their bank being Shari’ah-compliant and assured to deliver the promised services, employees being considerate and understanding, and finally being competitive by offering the best service with competitive charges. The study also confirmed that the avoidance of interest and other religious motives are the most important reasons why customers prefer to patronize the Islamic banks in Kuwait in general. However, when testing each bank individually, differences accrued in ranking the religious factor and being compliant with Islamic Shari’ah principles. The results are expected to provide both theoretical and practical contributions in the area of service quality management and customer behavior in Islamic banking. The overall findings are important for service quality managers to identify efficient and effective approaches for improving quality in their banks