RESEARCH zero. This experiment paved the path for






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Khurshid Kiani








Jahanzaib Ashiq Satti





MBA (1.5)
















Quaid-e-Azam School Of Management
Sciences, Quaid-e-Azam University, Islamabad.










Islamic banking was originated in back seventh century, when Hazrat
Khadija, first wife of Our Prophet(S.A.W),was a merchant and our Prophet(S.A.W)
played a role of an agent for her business by using mostly the “same principles as used by modern Islamic banks. In
the middle ages, Muslim word relied on Islamic banking principles for trade and
business activity .This idea spread through out spain, the Mediterranean and
the Baltic states, arguably providing some of the basis for western banking
principle. In the era of 1960`s to 1970`s , Islamic banking again capture the
attention of modern word. In 1963,Egyptians formed Islamic bank in MitGhmar ,
to reduce risk they only approve 40% of the loan and as a result their default
ratio was zero. This experiment paved the path for future and know a days Egypt
is considered as pioneers in Islamic Banking along with Malaysia and Indonesia


In Pakistan, Islamic banking sector attracts the attention of customers,
as a result this sector is showing good results from the last few years.
Keeping in view, the interest of customers towards Islamic banking, every bank
wants to capture the customers of Islamic banking , for this they opened new
Islamic branches in different cities. In 2002, there was only one Islamic Bank
but due to increase in knowledge and awareness related to Islamic products
among customers , this number is now reached to 13 Islamic banks in Pakistan.


As there is tough competition related to Islamic banking in Pakistan and
every bank is trying to attract maximum customers by providing different
services and Islamic products. In this study, we want to see the factors that
influence customers towards selection of Islamic bank in twin cities (
Rawalpindi and Islamabad) of Pakistan.


Literature Review



Errol and EI-Bdour (1989) and Erol. Kayak and EI-bdour(1990) conducted
study in Jordan and it revealed that product and services helps in attracting
the customers towards Islamic banking rather than religious
perspective.Omer(1992) studu showed that customer prefer Islamic banking due to
religious attachment as they did not want to involve themselves in the element
of interest. Leeds (1992) study revealed that service quality and good
professional staff attitude plays a vital role in satisfying customer. It shows
that when bank provide good services to customers, it helps in creating good
customer relationship.


Haron et al. (1994) argues that 40% of the respondents choose Islamic
banking due to Islamic factor and same research was conducted in Jordan and 206
respondents participate in it and finding was that 70% respondents select
Islamic banks because of religion. Hegazy (1995) conducted research in Egypt
and found that customer use Islamic banking services due to Islamic laws but
still they compare the services of both type of banks and then choose a bank.
Lévesque and McDougall (1996) study focuses on service quality for selection.
Garrard and Cunningham (1997) conducted research in Singapore and found that
they are inspired by abidance of Sharraih.


Metawa and Almossawi (1998) found shariah principles as a primary factor
for selection of banks . Conclusion can be drawn from study conducted by Naser
et al. (1999) in Jordan that customer prefer both religious and economic
factors while selecting a bank. Studies of both the researchers Zeithmal et al
(2000) and Hanson stated service quality as an important factor for
establishing long term relationship that why customer prefer this factor. Study
conducted by Almossawi (2001) in Bahrain from students of different
universities that shows the results that they prefer accessible location, ATM,
staff behavior and reputation of bank while selecting bank.


Study conducted by Ahmed and Haroon(2002) in Malaysia, they found
religious factor as a most powerful determinant.Sureshchander (2003)
found that in Indian banking industry technological factors are more preferable
over human factors like quality service etc. Bley and Kuehn(2004) in UAE argued
that individual are motivated by religious values , not by financial knowledge
for the selection of Islamic bank. Flavian et al. (2005) concluded that bank
image is strong factor to hold market position and creating trust among
customers. Dusuki and Abdullah (2006) presented that in Malaysia, customers
service is considered as an important tool while selecting bank and they
believe that staff should be well educated and deal them with respect.


Al-Hawari and Ward (2006) found that aborigines consider financial
performance and service quality as an important tool for customer satisfaction.
Dusuki and Abdullah (2007) argued employee ability as an important factor, as
employee’s behavior help in attracting customer and change their decision for
selecting bank. Ahmad et al. (2008) concluded in Malaysia that people


Who are more inclined towards Islam select Islamic bank for their
transactions for deposit. Osman et al. (2009) found that despite of the fact
that customers are well informed that international banks are providing better
services but still they prefer Islamic banking due to religious factor.
Marimutho (2010) observed that there are other factors like staff quality etc. that
effect customer decision but religious values are still at the top.


Idris et al.(2011) analyzed that Islamic bank not only take favor from
religious aspect of customer but also provide quality products and services.
Alam et al. (2011) prevailed in Malaysia religion has a powerful impact in
directing the behavior of human being in social and personal aspect.


Rehman A. and M.S. Shabbir (2010) explored that religious factor impact
on customer decision and action , as it help in shaping attitudes , beliefs and
knowledge of people. Ahmed et al. (2010) analyzed that service quality is
important factor , that help customer in making decision for selecting Islamic
bank. Ali et al. (2011) identified factors that not only satisfy but also
attract customer which are: Service quality, Financial benefits , Customer
quality ,bank image and bank competitiveness and shows considerable
relationship between customer satisfaction and these factors.


According to Taimoor (2012) higher loyalty of customer arrives from high
level of satisfaction and creates positive perception, when customer is fully
sure that bank is purely working on Islamic rules it leads towards loyalty.
Imtiaz et al. (2013) argued that corporations are more inclined towards
conventional banking because of no risk factor and fix interest rate, while
individual consider Islamic banking ethical and prefer it due to religious
factor”. Ghafoor et al (2014) conducted
research in Multan and it shows positive relationship among all variables(
religious, service quality and bank image) and


Research Model Frame work



Figure 1: Model for criteria for selection of an Islamic





(Al-Ajmi, Al-Saleh, &
Hussain, 2009)


Quality of Service


(Al-Ajmi, Al-Saleh, &
Hussain, 2009)


Availability of ATM

Rustam, & Dent,

Cunningham &



Religious Motives


& Bukhari, 2011)


Privacy & Confidentiality


(Awan & Bukhari, 2011)


Bank Reputation & Image


(Gerrard & Cunningham,


Variety of financing options


(Awan & Bukhari, 2011)


High profit & Low service charges


(Awan & Bukhari, 2011)


Recommendations from




(Awan & Bukhari, 2011)


Friendly & Responsive
attitude of


banking staff


(Awan & Bukhari, 2011)












































measures adapted were drawn from earlier relevant studies as stated in figure 1
and these measures are the criteria for the selection of an Islamic bank.





Based on the above model the following
hypotheses will be made:




effects consumers’ selection of an Islamic bank




of service effects consumers’ selection of an Islamic bank




motives effects consumers’ selection of an Islamic bank




of ATM effects consumers’ selection of an Islamic bank




& Confidentiality effects consumers’ selection of an Islamic bank




reputation & Image effects consumers’ selection of an Islamic bank




in financing options effects consumers’ selection of an Islamic bank




profit & Low service charges effects consumers’ selection of an Islamic




from friends/family effects consumers’ selection of an Islamic bank




& Responsive attitude of banking staff effects consumers’ selection of an
Islamic bank







Sample of Research



A survey will be conducted and data will be
gathered with the help of questionnaire taken from previous study, from 150
consumers on random bases. Data will be gathered from customers of 8 Banks in
Islamabad and Rawalpindi which includes Burj Bank, Dubai Islamic Bank, ,
Askari-Islamic, Bank AlHabib-Islamic, Alfalah-Islamic, Bank Islami, Meezan Bank
and UBL-Ameen.


Technique and tools



As it is quantitative study so responses of questionnaires will be
converted in to numeric digits with a liked scale of 1-5 with the help of SPSS
and One sample t-test will be used to investigate the all propositions and the
objective of the paper.


Expected Results



I believe that religious factor along with quality of service and
Dealing with customer will be the most influential factors among other





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