Introduction

From last few decades Islamic banking business is very attractive and fast growing industry for

both Muslims and non-Muslims. This banking system is similar to the conventional banking

system but there are huge difference lies in the processes of Islamic banking system as compare to

conventional banking. The Islamic banks do their businesses according to the rules and regulations

defined by the Quran and Sunnah (Ayaydin, Boudt, & Raza Muhmmad, 2017). The idea of Islamic

banking was emerged in 1950s but for some time there is no development in this field it gains its

strength of development back in 1970s and the importance of Islamic banking is recognized by the

peoples and analysts in the global recitation of 2008-2009. At that Islamic banks are the financial

institutions which are minimum effected by this crises (Naser, Salim, & Nuseibah, 2013) The

main purpose of Islamic financial institutions are to achieve the economic profits and social well

Being by applying the teachings of Islam in real life. As we now that the financial institutions

offering Islamic products are in competing in extremely growing industry it’s important for the

Islamic banks to improve their standards of service quality to satisfy their customers. As the world

is developing the customers are becoming more aware about their rights and the quality of service

which the institutions has to provide them due to this acceptations of customers are increasing and

because this factor the intuitions are facing great competition to improve the quality of services

which they are providing to their customers. Now a days when we see Islamic financial institutions

they are not only preforming the financial activates for the Muslims they are doing more than this.

They are introducing a new system which will re place the current conventional system and provide

benefits to the world economy. This is required for Islamic financial intuitions to understand the

service quality of products and services by customer prospective through which they can make the

peoples loyal to the financial institution. In Pakistan the state bank of Pakistan has passed a
regulation which says that the existing conventional bank can open an Islamic window or Islamic

branches which only provide Islamic products and services and state bank of Pakistan has also

banned the activity to open the conventional branch. This regulation is passed by keeping in view

that above 90% of population of Pakistan are Muslims so it seems that Islamic banking has bright

future in Pakistan. Many of the Pakistani banks are trying to convert their conventional status to

Islamic by changing their processes one of the example is faysal bank Ltd.

Customers are the ultimate bosses of an organization. Because sustainability and profit making of

an organization depend upon customers satisfaction. If customers are dissatisfy then then the

profits will shrink and sustainability become difficult (Nelson, 2006). Nelson also says that

customer satisfaction can be the cause of motivation for organization and the employees of

organization to perform well (Nelson, 2006) . The competition of Islamic financial institution and

conventional financial institutions is on the basics of efficient customer services. The customer

satisfaction is really important because customers are the source of income for the industry. So

because of which the organizations are making strategies to satisfy customers. Particularly in

banking sector they are paying it more attention because they are running in competitive market.

Mostly the service quality is measured by the factors of SERVEQUAL model. This model is

widely used in researches to measure service quality. This was proposed by a group of researcher

who belong to America in 1988. In this study I have took 5 service quality factors which are

(assurance, tangibility, reliability, empathy and responsiveness) compliance which means

minimum requirement to be halal which the Muslim can us. This factor is also added to

SERVEQUAL model to check the service quality of Islamic banking products.

 Objective
In Pakistan Islamic banking system is introduced few decades a go before this there is conventional

system in Pakistan after the independence. Pakistan is the country which is made on the slogan of

Islam. Especially the people of Peshawar have Islamic mind set so this study will show there

response towards Islamic banking. This study will also show that are the Islamic banks providing

sufficient quality of services to attract new customers and maintain the previous ones. This study

will also tell us that on which factors the Islamic banks has to focus to attract new customers from

the market. As Chitral is the business city of KP and most of the allied, educated and business

peoples are living in Chitral so these peoples have to choose banks to safe there money and good

returns on it and also consider service quality of banks. There is very little work has been done in

this area by using (assurance, tangibility, reliability, empathy and responsiveness). These five are

independent compliance is also added as an independent factor and the dependent factor which

depends on these factors is customer satisfaction. The data of customers will collected through

questioners.

1.2 Research questions

What is the relation between tangibility and customer satisfaction?

What is the relation between assurance and customer satisfaction?

What is the relation between responsiveness and customer satisfaction?

What is the relation between empathy and customer satisfaction?

What is the relation between compliance and customer satisfaction?

What is the relation between reliability and customer satisfaction?

What is the relation between awareness and customer satisfaction?

The main objective of this study to find relationship between dependent variable and independent

variables. The dependent variable is customer satisfaction and independent variables are

(assurance, tangibility, reliability, empathy, responsiveness and compliance)

H01: Customer satisfaction is not related with tangibility.

H02: Customer satisfaction is not related with assurance.

H03: Customer satisfaction is not related with reliability.

H04: Customer satisfaction is not related with responsiveness.

H04: Customer satisfaction is not related with empathy.

H06: Customer satisfaction is not related with compliance.

H07: Customer satisfaction is not related with awareness.

So from this study we are going to make an attempt to now the customer’s awareness and

satisfaction of Islamic banking in Chitral.

 Sample
Data collection Method

The questioner for this study is designed on LIKERT SCALE which contains the options strongly

disagree, disagree, neutral, agree and strongly agree.

3.3 Population and sample size

In this study we have to distribute questioners among the customers of three different banks equally

in Chitral. The Bank are Khyber, Bank Islami and Meezan bank.

Questioner

Strongly Disagree Neutral Agree Strongly

Disagree Agree

1. You are aware about the instrument used in

the financing products offered by Islamic
banks. like Mudharabah

2. Should conventional banks convert to

Islamic banks?

3. You are aware about the differences

between conventional banking system and
Islamic banking system
4. Islamic banks give many benefits than
conventional banks
5. Information about certain Islamic banking
products on the leaflet/ brochures/ website
can be easily understood and sufficient.

6. Islamic banks in Chitral offer interesting

products that attract customers than it have
in conventional banks

7. The features and benefits of the Islamic

banking products offered by Islamic banks
are known to you

8. Islamic banks should lengthen their

operation time

9. Services offered by Islamic banks are

efficient and time effective.

10. Islamic banks should open up more

branches and ATMs

11. Islamic banks provide varieties of mode of

services (Front-desk, e-banking, SMS
banking )

12. You are satisfied with the profit rate offered

by the Islamic banks

13. You always get prompt service whenever

you go to Islamic banks

14. Islamic banks charges more than

conventional banks
15. Islamic banks provide assurance on their
Shariah compliance products