Abstract
Purpose - The purpose of this study is to assess customers' perceptions of Islamic banks (IBs) of customers who have used or intend to use Ijarah service to purchase a car. The study further examines the mediating role of clarity and accuracy (CAA) of service offered between customer perceptions and customer satisfaction. This paper focuses on connecting in quantitative terms customers' perceptions of IB services to customer satisfaction by providing the first evidence of this relationship in the context of car Ijarah financing.
Design/methodology/approach - In this paper, a model is proposed to assess customers' perceptions of the Ijarah service used by IBs to finance car purchases. The model connects customers' perceptions to customer satisfaction with this Shariah-compliant service. The data are drawn from 300 randomly selected customers living in five major cities in Pakistan, and factor analysis and structural equation modeling are used to understand the patterns of correlation/covariance among a set of variables and to evaluate customers' perceptions of Ijarah financing for car purchases.
Findings - The results of the study show a significant positive relationship between customers' perceptions and customer satisfaction. In particular, the CAA of the services provided is a significant predictor of customer satisfaction. This paper finds that CAA is a partial mediator between customers' perceptions and customer satisfaction.
Research limitations/implications - As this study is based on only one country and one simple car Ijarah financing product, the results cannot be generalized to the entire industry. Therefore, deeper research is needed in which data from other countries are used and a range of models and approaches are applied to secure knowledge about the multinational and multifactor variations of Ijarah financing.
Practical implications - In terms of their implications for IBs, the study results provide a basis for the banks to more effectively cater to their customers by improving the services offered in line with customers' expectations and thereby increasing profitability. This investigation is much needed in academia and industry because the market share for Ijarah financing is growing and competition between IB products and conventional banking products is increasing.
Originality/value - This study presents the first endeavor to use exploratory factor analysis, confirmatory factor analysis and structural equation modeling to assess customer satisfaction in Ijarah financing using Pakistani banking clients' data. This approach is also applicable to various IB financial products and Shariah contracts.