Customers Awareness and Satisfaction of Islamic Banking Products and Services: Evidence from the Kuwait Finance House (Note 1)

By Naser, Kamal; Al Salem, Athmar et al. | International Journal of Marketing Studies, December 2013 | Go to article overview

Customers Awareness and Satisfaction of Islamic Banking Products and Services: Evidence from the Kuwait Finance House (Note 1)


Naser, Kamal, Al Salem, Athmar, Nuseibeh, Rana, International Journal of Marketing Studies


Abstract

The objective of this study is to explore the levels of customer awareness and satisfaction with Islamic financial products and services offered by the Kuwait Finance House (KFH). The attempt is also made to identify reasons behind dealing with the KFH. To achieve these objective, 650 questionnaires were distributed during the period between 15 April and 15 May 2011 to the KFH customers and 429 returned completed. The results of the questionnaire analysis revealed that a significant proportion of the KFH customers are not aware of many of the products currently on offer. The respondents are relatively satisfied with almost all aspects of the KFH, although some work needs to be done to improve the appearance, architecture, internal design and furniture of the bank. They also expect an increase in the parking facilities and to train staff to handle transactions over the phone. The respondents indicated that they deal with the KFH for its name and image, its guaranteed confidentiality, its trusted management and Sharia'h Supervisory Committee. The respondents also demonstrated that they hold accounts in Islamic and commercial banks to diversify their investments.

Keywords: customers awareness and satisfaction, Islamic banks, Kuwait Finance House

1. Introduction

Although the idea of Islamic banking goes back to the early 1970s, the importance of the Islamic banking system had been fully recognized during and after the financial crisis that struck the world economy at the end of 2008 and the beginning of 2009. The Islamic banks were among the least affected by the crisis. This was mainly due to the sound financial policy and risk management adopted by the Islamic banks. The success that Islamic banks have achieved has been reflected by their reported profits. The success, however, has not coincided with an increase in the Islamic banks market share. According to Naser and Mountinho (1997), Islamic banks are facing competition not only from other Islamic banks but also from conventional banks; bearing in mind that many conventional banks are currently providing Islamic financial services through what is referred to as "Islamic windows".

Even though the Islamic banking system is different from the conventional banking system in that the former abolishes dealing with interest and the latter is mainly based on interest, there are still some similarities between the two systems. The main objective of each banking system is to achieve economic development and growth. Both systems offer facilities such as: transfer and opening of current accounts, letters of credits, letters of guarantees, credit cards, travelers cheques, investment in securities, remittances, safe deposits boxes and commissions and fees on banking services. According to Naser et al (1999), competition intensifies when banks offer more or less similar products and services. Under this environment, customer satisfaction becomes a crucial factor in gaining a greater market share that would result in a better competitive position and would ultimately improve performance. Therefore, it is important to assess the level of customer satisfaction of an Islamic bank operating in an Islamic country where Islamic and conventional banks operate side by side. Naser et al. (1999) argue that assessing customers' satisfaction of an Islamic bank operating in an Islamic country raises two main question: first: what motivates customers to deal with an Islamic rather than a conventional bank? Second: what is the level of customer satisfaction? Subsequently, the purpose of this study is to identify the level of customer awareness and satisfaction towards KFH. KFH was established in Kuwait in 1977 to be the first bank operating in accordance with the Islamic Sharia'h principles. KFH is the second largest (after Al-Rajhi Banking Investment Company in Saudi Arabia) Islamic banks on the GCC countries with total assets exceeding $48 billion in 2011.

Looking at the financial figures in the annual reports of the Islamic and conventional banks operating in Kuwait and summarized in Table 1, it is evident that KFH is mainly ranked number two among the Islamic and commercial banks in terms of assets, deposits and the amount of the reported profit. …

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