Professional Documents
Culture Documents
Bank Image Uae
Bank Image Uae
Md Hamid Uddin
is an associate professor of Finance at University of Sharjah. His area of research includes corporate finance, asset pricing, portfolio
investments, IPO price behavior and so on. He teaches investment and portfolio management, corporate finance, financial markets and
institutions, and international finance at both graduate and undergraduate levels.
ABSTRACT This study investigates how bank customers in the UAE view Islamic banks
versus conventional banks and whether this image affects customer loyalties or selection
of a bank. We distributed a questionnaire to a convenient sample of UAE bank customers
that focused on five areas: bank image, bank products, service quality, cultural aspects
and religious factors, in addition to demographic attributes of the sample. The main
findings of this study are: first, most UAE bank customers prefer banking with Islamic
banks, although they are not satisfied with the quality of products and services; second,
customers generally have a positive image of whatever bank they dealt with; third, the
regression analysis results indicate that the most important factor in choosing a bank
was bank products followed by service quality and then religious factors; fourth, there
is a significant difference between how customers perceive UAE Islamic banks versus
conventional banks; fifth, there is a significant difference in how customers perceive UAE
Islamic banks based on their gender, education and duration of the relationship; and
finally, there is a significant difference in how customers perceive UAE conventional
banks based on their gender.
Journal of Financial Services Marketing (2009) 14, 232–244. doi:10.1057/fsm.2009.17
Keywords: bank image; Islamic banks; conventional banks; bank products and services
INTRODUCTION
This study explores how UAE customers
Correspondence: Hussein A. Hassan Al-Tamimi view Islamic banks and conventional banks.
Department of Accounting, Finance and Economics, We investigate whether this image affects
College of Business Administration, University of Sharjah,
PO Box 27272, Sharjah, UAE
customer preference about the type of bank
E-mail: hussein@sharjah.ac.ae they want to patronize. In the highly
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
www.palgrave-journals.com/fsm/
Comparing Islamic and conventional banks
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244 233
Al-Tamimi et al
234 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
Comparing Islamic and conventional banks
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244 235
Al-Tamimi et al
customer is probably a potential customer for banks’ services. The findings also indicated
a competing bank and word-of-mouth from that a majority of customers banked with
a disappointed and unsatisfied customer may Islamic banks because of religion. Metawa
harm the bank’s image. and Almossawi23 focused their study on
Dusuki and Abdullah19 studied why customers of Bahrain Islamic Bank and Faisal
Muslim customers prefer to deal with Islamic Islamic Bank of Bahrain, finding that
banks, using a sample of 750 respondents customers considered their Islamic principles
from four different regions in Malaysia. They the most important factor in selecting a bank,
concluded that the selection of Islamic banks followed by rewards extended by the banks,
was a combination of Islamic and financial influence of family and friends, and
reputation and quality service offered by the convenient location. Metawa and Almossawi
bank. Other important factors in bank concluded that socio-demographic factors
selection included good social responsibility such as age, income and education were
practices, convenience and product price. important criteria in bank selection, a
Haron et al 20 surveyed 301 Islamic and finding that indicates religion as the
conventional bank customers, also in most important reason for customers
Malaysia, and found that the most important patronizing Islamic banks.
factors in bank selection were fast and In sum, researchers have devoted many
efficient services, speed of transactions, studies to exploring the relationship among
friendliness of bank personnel and service quality, customer satisfaction, the use
confidentiality of the bank. They also of technology and loyalty or bank image.
reported that 40 per cent of the respondents But more research is needed, particularly in
said that religion was a prime reason for the area of Islamic banking and specifically in
using Islamic banking services. Although the context of the Arab World, including the
there was a high level of awareness of UAE. Arab countries are generally Muslim
Islamic products among customers, they and there is a high demand for Islamic
did not understand the differences banking products and services.
between Islamic and conventional banking
services.
Al-Tamimi and Al-Amiri21 investigated
service quality in UAE Islamic banks using RESEARCH METHODOLOGY
a sample of 311 customers from two UAE
Islamic banks. They found a positive and Research questions and
statistically significant relationship between hypotheses
overall service quality and the SERVQUAL The study intends to answer the following
dimensions. Empathy and tangibles were three questions:
the most important dimensions and there
was no significant difference between level 1. Is the first preference of UAE customers
of overall service quality between the is Islamic banks or conventional banks?
Dubai Islamic Bank and Abu Dhabi 2. If the first preference of UAE customers
Islamic Bank. is Islamic banks, is it based on the type
Naser et al22 assessed customer awareness and quality of products or the type and
and satisfaction towards Islamic banks in quality of services or on religious and
Jordan using a sample of 206 customers, cultural factors?
finding a certain degree of satisfaction with 3. If the first preference of UAE customers
many Islamic banks’ facilities and products. is conventional banks, is this preference
However, the respondents expressed based on type and quality of products or
dissatisfaction with some of the Islamic type and quality of services?
236 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
Comparing Islamic and conventional banks
We also formulate the following three assurance, five items on responsiveness and
hypotheses: nine items on empathy. Part four also
includes one question measuring overall
Hypothesis 1: There is a significantly posi- service quality. The last part includes a
tive relationship between the image of general question about whether respondents
UAE banks and the quality of bank prefer conventional or Islamic banks, and the
services, the level of satisfaction with reasons for their choice.
bank products, and religious and cultural
factors. Sampling and data collection
This research uses a convenient sample of
Hypothesis 2: There is a significant differ- UAE bank customers because it was
ence between customers’ image of UAE impossible to distribute questionnaires to all
Islamic banks and their image of conven- customers. It was not possible to get
tional banks. confidential information about customer
characteristics from banks in order to classify
Hypothesis 3: Customers’ image of UAE them into different groups for research
banks varies depending on their age, gen- purposes. The questionnaires were distributed
der, education and length of relationship in two ways: some were handed to branch
with the bank. managers who were requested to pass them
along to their customers. The authors hand-
As far as the researchers know there is delivered other questionnaires. Customers
no existing instrument that fits the purpose could select questionnaires in English or
of this study. We therefore developed a Arabic. From the 800 questionnaires
modified questionnaire based mostly on distributed, we received 620 responses, of
the instrument developed and tested by which 362 were excluded because of
Parasuraman et al, Meiss Alison et al, incomplete data. The remaining 257 usable
Bloemer et al and Al-Tamimi and questionnaires represent a response rate of
Al-Amimri.8,21,24–25 We first distributed the 32.25 per cent, considered acceptable. The
questionnaire to seven experts (three questionnaires were distributed to customers
academics and four practitioners) to examine of the four Islamic banks and the major
the scales, as suggested by Devellis.26 conventional banks in the three largest cities
Accordingly, the authors revised the first of the UAE: Abu Dhabi, Dubai and Sharjah.
draft by eliminating, adding or rewording More than 80 per cent of the UAE
some of the questions. There were English population lives in these three cities. There
and Arabic versions of the questionnaire, were 178 respondents (69.3 per cent) from
depending on the respondents’ preference. Islamic banks and 79 (30.75 per cent) from
The questionnaire has five parts. The first conventional banks
part consists of demographic attributes: age,
gender, employment status, education and DATA ANALYSIS AND
number of years as a bank customer. The DISCUSSION
second part concerns bank image and The data analysis has three parts: the profile
includes 28 questions. The third part consists of the respondents, reliability of the measures
of 14 questions about bank products. The and testing the hypotheses.
fourth part has 35 questions about service
quality using a 7-point Likert scale to Profile of study respondents
compare perception of quality with The study’s respondents were asked to
expectations. There are six items on the provide demographic data on age, gender,
tangibles, seven items on reliability, seven on income, education and duration of
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244 237
Al-Tamimi et al
238 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
Comparing Islamic and conventional banks
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244 239
Al-Tamimi et al
PROD 1.000 — — — — — — —
TAN 0.682** 1.000 — — — — — —
REL 0.615** 0.771** 1.000 — — — — —
RES 0.584** 0.696** 0.844** 1.000 — — — —
ASS 0.584** 0.734** 0.804** 0.804** 1.000 — — —
EMP 0.633* 0.727** 0.819** 0.773** 0.821** 1.000 — —
RELG 0.448** 0.389** 0.374** 0.342** 0.330** 0.511** 1.000 —
CULT 0.449** 0.398** 0.375** 0.319** 0.328** 0.499** 0.932** 1.000
**correlation is significant at 0.05 level.
the regression model, namely TAN, RES, regression model for each type. Table 6
ASS, EMP and CULT. The remaining three reveals almost the same results for the
variables were bank product (PROD), two types, which confirms Hypothesis 1.
reliability (REL) as a measure of service However, the coefficient of the religious
quality, and religious factors (RELG). These factor (RELG) is, as expected, positive and
factors represent a good combination of the statistically significant for Islamic banks but
factors that influence bank image. Table 6 statistically insignificant for conventional
shows that the result of the regression model banks.
R2 is 0.85. This indicates that the three
independent variables explain 85 per cent of Differences of bank image based
the variations of bank image. The R2 is on demographic variables
significant at the 0.01 level. The estimated To test the remaining two hypotheses, we
coefficients of two independent variables ran a one-way ANOVA whose results will
were, as expected, positive and statistically be ordered according to the research
significant at the 1 per cent level. However, hypotheses.
the value of coefficients and t statistics Table 7 reveals that there is no significant
indicate that bank products are the most difference between customers’ image of
influencing factor, followed by service quality UAE Islamic banks and their image of
measured by reliability and then religious conventional banks. These results were not
factors. The three variables have a positive expected because we assumed that each of
effect on customer image of UAE banks, these two types of banks has its own
which confirms Hypothesis 1. This is strategies and policies on bank products and
consistent with the findings of Zineldin and service quality. Therefore, the bank image
Ekrem et al.18,1 The cultural factors were should be different or otherwise Islamic bank
dropped because of the multicollinearity products and services are the same as those
problem. of conventional banks. This is not the actual
Regarding the first preference of customers case as, for example, Islamic financial
of the two types of banks, we ran the same instruments such as bonds (Sukuk), Murabaha
240 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
Comparing Islamic and conventional banks
Table 7: The results of analysis of variance for Islamic banks and conventional banks
Bank image — 94 — — —
Between groups 20.785 160 0.221 1.073 0.344
Within groups 32.964 254 0.206 — —
Total 53.749 — — — —
and profit-sharing are not the same as Table 9 reveals the results of one-way
conventional financial instruments. ANOVA analysis for the UAE conventional
Table 8 shows the results of one-way banks’ customer image and demographic
ANOVA analysis for the UAE Islamic banks’ variables. There is a significant difference in
customer image and demographic variables to customers’ image of UAE conventional banks
test Hypothesis 3. There is a significant based on gender at a 1 per cent level,
difference in customers’ image of UAE confirming Hypothesis 3 for conventional
Islamic banks based on gender, education and banks. But because the sample has such a
duration of relationship, statistically significant small percentage of females (14.4 per cent),
at 1 per cent, 5 per cent and 10 per cent, we need to interpret the results cautiously.
respectively. These results partially confirm Unexpectedly, we find that there is
Hypothesis 3. However, the results indicate a significant difference in customers’ image
that there is, unexpectedly, no significant of UAE conventional banks based on age,
difference in customers’ image of UAE education and duration. Hypothesis 3 was
Islamic banks based on age. not confirmed.
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244 241
Al-Tamimi et al
Table 8: One-way ANOVA test: The UAE Islamic banks’ customer image and demographic variables
Table 9: One-way ANOVA test: The UAE conventional banks’ customer image and demographic variables
242 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
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APPENDIX
See Table A1.
1. The functions and operating modes of conventional 1. The functions and operating modes of Islamic banks
banks are based on fully manmade principles. are based on the principles of Islamic Shariah.
2. The investor is assured of a predetermined rate of 2. In contrast, it promotes risk sharing between provider of
interest. capital (investor) and the user of funds (entrepreneur).
3. It aims at maximizing profit without any restriction. 3. It also aims at maximizing profit but subject to Shariah
restrictions.
4. It does not deal with Zakat. 4. In the modern Islamic banking system, it has become
one of the service-oriented functions of the Islamic
banks to be a Zakat Collection Centre and they also
pay out their Zakat.
5. Lending money and getting it back with compounding 5. Participation in partnership business is the fundamental
interest is the fundamental function of the function of the Islamic banks. So we have to
conventional banks. understand our customer’s business very well.
6. It can charge additional money (penalty and 6. The Islamic banks have no provision to charge any
compounded interest) in case of defaulters. extra money from the defaulters. Only small amount
of compensation and these proceeds are given to
charity. Rebates are given for early settlement at the
bank’s discretion.
7. Very often it results in the bank’s own interest 7. It gives due importance to the public interest.
becoming prominent. It makes no effort to ensure Its ultimate aim is to ensure growth
growth with equity. with equity.
8. For interest-based commercial banks, borrowing 8. For the Islamic banks, it must be based on a Shariah
from the money market is relatively easier. approved underlying transaction.
9. As income from the advances is fixed, it gives little 9. As it shares profit and loss, the Islamic bank pays
importance to developing expertise in project greater attention to developing project appraisal and
appraisal and evaluations. evaluations.
10. The conventional banks give greater emphasis on 10. The Islamic banks, on the other hand, give greater
credit-worthiness of the clients. emphasis on the viability of the projects.
11. The status of a conventional bank, in relation to its 11. The status of Islamic bank in relation to its clients is
clients, is that of creditor and debtors. that of partners, investors and trader, buyer and seller.
12. A conventional bank has to guarantee all its deposits. 12. Islamic bank can only guarantee deposits for deposit
account, which is based on the principle of al-wadiah,
thus the depositors are guaranteed repayment of their
funds, however if the account is based on the
Mudarabah concept, the client has to share in a
loss position.
244 © 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 3, 232–244
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