The Influence of Service Quality Toward Customer Satisfaction (Case Study of Mandiri Syariah Bank)

THE INFLUENCE OF SERVICE QUALITY TOWARD CUSTOMER SATISFACTION

(Case Study of Mandiri Syariah Bank) Thesis

Submitted to Faculty of Economics and Businesses

To meet the Requirements in Achieving Degree of Bachelor of Economics

Submitted By: Audita Arfanda NIM: 605082000027

INTERNATIONAL CLASS PROGRAM MANAGEMENT DEPARTMENT

FACULTY OF ECONOMICS AND SOCIAL SCIENCES UNIVERSITAS ISLAM NEGERI SYARIF HIDAYATULLAH

JAKARTA 1431 H / 2010 M

THE INFLUENCE OF SERVICE QUALITY TOWARD CUSTOMER SATISFACTION

(Case Study of Mandiri Syariah Bank)

Thesis

Submitted to Faculty of Economics and Businesses

To meet the Requirements in Achieving Degree of Bachelor of Economics

Submitted by:

Audita Arfanda NIM: 605082000027

Under Supervison of

Academic Supervisor I Academic Supervisor II

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Prof. Dr. Ahmad Rodoni Arief Mufraini, LC, M.si NIP: 19690203200112.1.003 NIP: 197701222003121001

INTERNATIONAL CLASS PROGRAM MANAGEMENT DEPARTMENT

FACULTY OF ECONOMICS AND SOCIAL SCIENCES UNIVERSITAS ISLAM NEGERI SYARIF HIDAYATULLAH

JAKARTA 1431 H / 2010 M

Today, we administered a comphresive examination to Audita Arfanda, ID 605082000027. The title of his thesis is “The Influence of Service Quality Toward Customer Satisfaction (Case Study of Mandiri Syariah Bank)”. After proper examination, we have decided that he has met all of the requirements for the title of Bachelor of Economics on the field of Management, State Islamic University Syarif Hidayatullah Jakarta.

Jakarta, June 29th, 2009

Comprehensive Examination Team

Examiner I Examiner II

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Prof. Dr. Abdul Hamid, MS Prof. Dr. Ahmad Rodoni NIP: 19570617198503.1.002 NIP: 19690203200112.1.003

Examiner III

Arief Mufraini, LC, M.Si NIP: 197701222003121001

THE INFLUENCE OF SERVICE QUALITY TOWARD CUSTOMER SATISFACTION

(Case Study of Mandiri Syariah Bank) Thesis

Submitted to Faculty of Economics and Businesses

To meet the Requirements in Achieving Degree of Bachelor of Economics

Submitted by: Audita Arfanda NIM: 605082000027

Under Supervison of

Academic Supervisor I

Prof. Dr. Ahmad Rodoni NIP. 19690203200112.1.003

Academic Supervisor II

M. Arief Mufraini, Lc., M.Si NIP. 197701222003121001 Expert Examiner I

Prof. Dr. Abdul Hamid, MS NIP. 19570617198503.1.002

Expert Examiner II

Cut Erika Ananda Fatimah, SE., MBA

INTERNATIONAL CLASS PROGRAM MANAGEMENT DEPARTMENT

FACULTY OF ECONOMICS AND SOCIAL SCIENCES UNIVERSITAS ISLAM NEGERI SYARIF HIDAYATULLAH

JAKARTA 1431 H / 2010 M 

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AUTO BIOGRAPHY 1. PERSONAL INFORMATION

Name : Audita Arfanda

Place/Date of Birth : Bekasi, September 13rd , 1987

Religion : Islam

Nationality : Indonesia

Address : Jl. Sejahtera No. 39 RT/RT 03/003

Kel/Kec Jatiwaringin, Pondok Gede, Jawa Barat, 17411 Phone Number : 021 8487438

E-mail : auditwidjojo@gmail.com

2. FORMAL EDUCATION

1993 - 1999 : Assyafiiyah Elementary School,Jatiwaringin, West Java 1999 - 2002 : Putra I Junior High School, Kalimalang, East Jakarta 2002 - 2005 : Dwiwarna Boarding School, Parung, Bogor

2005 - 2010 : Faculty of Economics and Business, Major in Management State Islamic University Syarif Hidayatullah Jakarta

2007 - 2009 : College of Business, Bachelor of International Business Management, Dual Degree Programme, Universiti Utara Malaysia (UUM)

2009 - Present : College of Business, Master of Human Resource Management Universiti Utara Malaysia (UUM)

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3. INFORMAL EDUCATION

2006 - 2007 : Brevet A & B Tax Accounting, FISIP, University of Indonesia 2009 : Entrepreneurship Skill, College of Business,

Universiti Utara Malaysia

2010 : Occupational Safety & Health Management System ISO 18001:2007, University of Indonesia

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ABSTRAK

Penelitian ini dilakukan untuk menganalisis pengaruh service quality terhadap

customer satisfaction diindustri perbankan syariah. Penggunaan model SERVQUAL terdiri dari enam dimensi : tangibles, responsiveness, assurance, dan empathy dengan menambahkan dimensi compliance untuk mengukur service quality di bank. Responden penelitian sebesar 120 nasabah yang memiliki rekening dibank syariah. Responden penelitian adalah nasabah yang memiliki rekening bank syariah dan memiliki rekening konvensional. Analisis data yang digunakan dalam penelitian ini uji instrument yang terdiri dari uji validitas dan reliabilitas. Untuk pengujian hipotesis menggunakan metode regresi sederhana untuk menganalisis enam dimensi : tangibles, responsiveness, assurance, dan empathy dengan menambahkan dimensi

compliance untuk melihat pengaruhnya terhadap service quality di bank. Hasil penelitian secara keseluruhan menunjukkan bahwa secara keseluruhan dimensi dari service quality

berpengaruh terhadap customer satisfaction.  

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ABSTRACT

This study attempts to examine the relationship between service quality perception and customers’ satisfaction in Indonesian Islamic banking This model starts with SERVQUAL measurement scales consisting of six dimensional structures: tangibles, reliability, responsiveness, assurance, and empathy, and plus the compliance dimensions to measure Indonesian Islamic banking service quality.Respondents are from 120 customers who visit the bank counters. They must have an account with one of the full-fledged Islamic banking and dual-banking systems. The results showed that the majority of the Islamic banking customers were satisfied with the overall service quality provided by their banks. The data analysis used instrument test consists of validity and reliability test. For the hypothesis testing used simple regression tests to analyzed six dimensional structures: tangibles, reliability, responsiveness, assurance, and empathy, and plus the compliance dimensions toward service quality. The findings suggest that the standard model of Islamic banking service quality dimensions should consist of the six dimensions and good determinants of satisfaction. The relationship between service quality and customer satisfaction was significant.

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PREFACE Bismillahirrohmanirrohim

By praising Thank Heavens to Allah that showered divine guidance, the hidayah and inayah so writer can finish the task of Thesis that be entitle “The Influence of Service Quality Toward Customer Satisfaction (Case Study of Mandiri Syariah Bank)”.

Shalawat and greetings it is hoped was showered to Rasulullah SAW as well as the family, the friends but also anyone who followed the steps and his guidance.

In an effort to this Thesis there are many obstacles and the barriers as well as the difficulty that the writer faced. To face this difficulty, the writer received much good help of morale and material that are so valuable, the guidance and facilities that really were needed. Especially to my parents that never tired gave the affection and their support took the form of the prayer, morale and material to the writer towards the compilation of this Thesis.

In making this thesis, the writer was not alone but I was supported and taught by many parties. In this opportunity, the writer would like to say my huge thankful to:

1. Prof. Ahmad Rodoni as the Thesis Supervisor 1 and as the Assistant Dean of Academic Faculty of Economics and Business, State Islamic University Syarif Hidayatullah Jakarta, that sincerely gave time to give the guidance that were useful for the compilation of this Thesis.

2. Arief Mufraini, LC, M.SI as the Thesis Supervisor 2 and as the Technical Coordinator of International Faculty of Economic and Business, State Islamic University Syarif Hidayatullah Jakarta that sincerely gave time to give the guidance that was useful for the compilation of this Thesis.

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3. Prof. Abdul Hamid MS as a Dean of Faculty of Economic and Business, State Islamic University, Jakarta.

4. My lecturer who often performed an educational service the writer with various science sorts while joining lectures as well as the staff Faculty of Economic and Business, State of Islamic University Syarif Hidayatullah Jakarta.

5. My lovely parents, Dr. Adi S. Widjojo, MM, MBA and Mrs Untari Susilowati who gave the support and become the source of the motivation, was most main valuable. I realize that I could be nothing without their prayer to Allah SWT, especially to my mother for her time every midnight, doing prayer to his children and my family in general.

6. My brother and sister, Advan Adrianda and Armita Athennia who helped both from the aspect of morale and material in this thesis process.

7. My cousins, Mas Eri Wirandana and Mas Jay zay. Thanks for the times and energy to accompany and assist the writer to finish this thesis.

At the end, the writer Expects for any critics as well as suggestions that could improve the content of this thesis. Hopefully this thesis could be worthwhile for all of us. Amien. Thank you.

Wassalamualaikum Warrahmatullahi Wabarrokatuh.

Jakarta, October 2010

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TABLE OF CONTENTS

Page of Thesis Approval ... i

Page of Comprehension Test ... ii

Page of Thesis Comprehension Test ... iii

Auto Biography ... iv

Abstrak ... vi

Abstract ... vii

Preface ... viii

Table of Contents ... x

List of Table ... xii

List of Figure ... xiv

List of Appendix ... xv

Chapter I INTRODUCTION A. Background ... 1

B. Problem Formulation ... 5

C. Research Objective and Purpose ... 6

Chapter II LITERATURE REVIEW A. Islamic Banking ... 7

B. Service Quality Concept ... 15

C. Service Quality Attributes of Retail Banking ... 17

D. Customer Satisfaction ... 21

E. The Effect of Satisfied and Dissatisfied Customer ... 23

F. Measuring Customer Satisfaction ... 25

G. Customer Satisfaction Measurement Advantages ... 27

H. Consideration Framework ... 29

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Chapter III RESEARCH METHOD

A. Research Scope ... 33

B. Sampling Method ... 34

C. Population Research ... 34

D. Data Collection Method ... 35

E. Analysis Method ... 35

E.1 Validity Analysis ... 36

E.2 Reliability ... 37

F. Operationalization Variable ... 37

Chapter IV ANALYSIS A. Responden Characteristics ... 41

B. Instrument Test ... 46

C. Descriptive Statistics ... 52

D. Hypothesis Testing ... 66

Chapter V CONCLUCION AND IMPLICATION A. Conclusion ... 69

B. Implication ... 69

C. Limitation ... 70

D. Recommendation ... 71

REFERENCES ... 72

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LIST OF TABLES

Table 3.1 Service Quality Operationalization Variable ... ... 39

Table 3.2 Customer Satisfaction Operationalization Variable ... ... 40

Table 4.1 Respondent’s Characteristics According to Gender ... 41

Table 4.2 Respondent’s Characteristics According to Age ... 42

Table 4.3 Respondent’s Characteristics According to Education ... 43

Table 4.4 Respondent’s Characteristics According to Occupation ... 44

Table 4.5 Respondent’s Characteristics According to Income ... 45

Table 4.6 Validity Test of Tangible ... 47

Table 4.7 Validity Test of Reliability ... 47

Table 4.8 Validity Test of Responsiveness ... 48

Table 4.9 Validity Test of Assurance ... 48

Table 4.10 Validity Test of Empathy ... 49

Table 4.11 Validity Test of Compliance ... 50

Table 4.12 Validity Test of Customer Satisfaction ... 50

Table 4.13 Reliability Test ... 52

Table 4.14 Descriptive Statistic of Tangible, Reliability, Responsiveness, Assurance, Empathy, Compliance, and Customer Satisfaction ... 53

Tabel 4.15 Descriptive Statistic Tangible ... 55

Tabel 4.16 Descriptive Statistic Reliability ... 57

Tabel 4.17 Descriptive Statistic Responsiveness ... 59

Tabel 4.18 Descriptive Statistic Assurance ... 60

Tabel 4.19 Descriptive Statistic Empathy ... 62

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LIST OF FIGURE

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LIST OF APPENDIX

Number Explanation Page

1 Questionnaire……….. 75

2 Validity Test ……… 83

3 Reliability Test ……… 87

4 Descriptive Statistic Test ……… 88

CHAPTER I INTRODUCTION

A. Background

Islamic banking is a popular topic in Muslim countries. Islamic banking has been established in more than 100 countries, with an estimated $300 billion in assets that are increasing by 15 percent a year, according to the Asian Banker (2005) a financial-services consultancy. In Malaysia, where 60 percent of the population is Muslim, both Islamic banks and conventional banks operate side by side (Karim and Affif, 2005).

In the last five years, the Islamic banks development in Indonesia is phenomenal. The number of banks increased from only five banks ( two Islamic Commercial Banks and three Islamic Banking Unit) in 2000 to 18 banks ( three Islamic Commercial Banks and 15 Islamic Banking Unit) by the end of 2004. Assets grow by an average of 70% per year in the last five years, namely from Rp 1,790 trillion to Rp 14,035 trillion by the end of 2004. Fund collected by the Islamic banks in Indonesia has reached Rp 10,559 trillion, while financing channelled by the Islamic banks reached Rp 10,978 trillion, creating a finance to deposit ratio of 104,00 %. Another important development of Islamic banks in Indonesia is the number of branch and sub-branch offices. In 2000, the number of branch offices was only 28, while in 2004 it has grown to 148.1 this does not include the

number of ATM (Automatic Teller Machines) that can be accessed by Islamic bank customers ( Karim and Affif, 2005).

In 2005, the numbers of Islamic banks still increase significantly. Following this growth is the increase of number of branch offices, sub-branch offices, ATM, assets, and of course customers. Unfortunately, studies’ regarding customers’ behavior of the Islamic banking customers in Indonesia is still rare. Questions regarding: what is the public perception of Islamic banks, why customers choose an Islamic bank for its financial need, why customers choose a certain bank, why customers prefer a certain Islamic bank, and what is customer’s knowledge on Islamic bank products are so important but currently not fully understood yet. This lack of consumer knowledge then creates the dilemma of Islamic banking in Indonesia.

Service quality has become a main interest in the industrial world especially in the service industries. The key to success in winning the global competition now and in the future is to have high quality service. High quality of service is believed to influence over customer value and customer satisfaction. (Heskett et.al., 2007). Therefore, the importance of service quality, value, and customer satisfaction seems justified to the survival of service companies, including the banking companies. Many empirical studies in various sectors of service industry such as banking, hotel, insurance; long distance calls companies, workshops, car rental, and

other financial companies have been conducted to find out the factors that determine service quality.

Service quality has always been the main study for retail banking (Sureshchandar et.al., 2002) in today's very competitive environment in which a lot of banks are available for customers to choose from. However, we need to study further the factors that enable banks to attract and maintain their customers. Banks seeking strong competitiveness in the future need to develop new ideas to foster good relationships with their retain customers.

The significant growth of banks has caused the appearance what is called "buyer's market" in which the supply exceeds the demand. In this condition, the customers are in strong bargaining position and therefore the banks have to be more effective in providing services because customers now have many choices in determining the bank they want. The customers' need for excellent service keeps changing. The level of service quality varies from time to time.

There is no guarantee that what is excellent service today is also applicable for tomorrow. There is also the rapid change of the retail-banking sector in the last 15 years with the increased application of the technology in the service delivery. To win the battle of global competition in the service industries and be able to survive, banks will need to use new strategies in providing service that will satisfy their customers. This is the

reason why service marketing and bank marketing in particular keeps developing and it is gaining the prominence in the marketing literature.

The interest in service marketing research on service quality and customer satisfaction has grown recently. Hundred of studies have been conducted by applying related theories and methods in the service industry, especially in retail banking industry. Angur et al. (1999) tested SERVQUAL and SERVPERF frameworks in the retail banking industry. Avkiran (1994) has also proposed an instrument for measuring the quality of banks' branches. Similarly, Bahia and Nantel (2000), Sureschandar and colleagues (2002) developed a reliable and valid scale for measuring the quality of retail banking services.

However, there are continuing demands for refining the theories that are suitable to retail banking setting. One way to refine a theory is to consider variables within the existing model that are potentially powerful in predicting the dependent variable. For this reason, after Caruana (2002) examined his model that links service quality to service loyalty via customer satisfaction, he suggested the need to consider the role of customer value and company image/reputation within the model.

Likewise, Cronin and his colleagues (2000) who assessed the effects of quality, value and customer satisfaction on behavioral intentions across multiple services industries (excluding banking industry) suggested the need to include additional decision-making variables such as the tangible quality of service products, the quality of service environment

(i.e. the servicescape), and customers' expectations. They also suggested the need to conduct replication in another area.

This study attempts to examine the relationship between service quality perception and customer’s satisfaction in Indonesian Islamic banking by adapting and modifying SERVQUAL and CARTER scales (Othman and Owen, 2002). This research is important in line with the obvious cross-cultural and religious differences between these two key customer segments. In the Indonesian context, there is a strategic dimension that needs to be understood. The dichotomy between conventional and Islamic Bank has traditionally been an invisible frontier between ethnic groups in light of the role of religion in Indonesia. The widespread use of Islamic banking by non-Muslim customers may indicate that this invisible barrier can be crossed. That would bode well for the Indonesian Government’s effort to promote national unity.

B. Problem Formulation

Business competition is much stretched force all bank or service company to have business strategy in running business. Related in these things, so the problem will be researches are:

Is there significant influence between service quality toward customer satisfaction?

C. Research Objective and Purposes 1. Objective

The objective of this research is :

To analyze the influence of service quality toward customer satisfaction

2. Usefulness of Research

a. For the researcher, to increase knowledge, especially knowledge about the activity consumer in service quality attribute and customer satisfaction. Also as the form of the implementation on the theory and knowledge those were received in the studying process.

b. For the student and the academic, as the addition of the scientific reading material to become one of the sources of knowledge towards the subject consumer behavior, especially concerning the application consumer preference. c. For Banking Industry

To be consider on improving the service quality of islamic bank to develop and maintain customer satisfaction.

CHAPTER 2

Literature Review

This chapter presents the theoretical foundation, based on the literature pertinent to the current research, by first reviewing the Islamic Banking concepts, service quality concepts, followed by a critique of SERVQUAL, service quality attributes, and service quality attributes of retail banking industry. Next, a review of literature related to perceived value, and customer satisfaction is presented. This is followed by a review of research conducted on customer satisfaction - service quality relationship. Finally, the chapter will conclude with a presentation of the contributions of this research to the service marketing literature, and the presentation about the loyalty and the effect of service quality attributes on customer satisfaction.

A. Islamic Banking

Islamic banking operates under Islamic commercial law, or fiqh-al-muamalat, which deals with contracts and the legal ramifications of contracts. Contracts may be categorized as valid, invalid, or void. The contract is the basis of Islamic business and is the measure of a transaction’s validity. A contract also means an engagement or agreement between two persons in a legally accepted, meaningful, and binding manner.

Aqad is the Arabic term for contract and means a tie or a knot that binds two parties together. The word aqad is also used in the sense of confirming an

oath. In legal terminology, aqad refers to a contract between two parties on a particular matter, which is to be concluded upon the offer and the acceptance of the parties concerned (Billah 2006).

The various forms of commercial contracts in Islam can be identified in the Quran and in the jurisprudence of ancient and modern Islamic scholars. In Islamic banking, contracts play an important role in ensuring transparency and structuring transactions so that conformity with Islamic law is maintained. In Islamic law, rules are prescribed for specific contracts as illustrated in Figure 2.1. Contract of Exchange. The sales contract (bai contract) is the primary contract of exchange in Islamic commercial law. It involves the transfer of ownership of a lawful commodity for a fixed price or for another commodity (barter trade).

Figure 2.1. Key Types of Islamic Contracts in Islamic Banking

Source : Adawiah (2007)

Sales contracts are used extensively in Islamic banking and include the following: • Murabahah contract (cost-plus-markup contract) involves the sale of

lawful goods at a price that includes an agreed-upon profit margin for the

bank (seller). It is mandatory for the bank to declare to the customer the cost and profit. Payment can be, depending on the agreement between the parties, spot or deferred.

• Bai’ bithaman ajil contract (deferred-payment sale) is a sale of goods on a deferred-payment basis. The bank purchases an asset and sells it to the customer at cost plus a profit margin agreed to by both parties. The bank is not required to disclose the price and profit margin. Payments can be monthly, quarterly, or semiannually.

• Bai’ salam contract (forward contract) refers to an agreement whereby payment is made in advance for delivery of specified goods in the future. The underlying asset does not exist at the time of the sale. This type of contract is used in agricultural financing. Funds are advanced to farmers who deliver their harvested crops to the bank to sell in the market.

• Bai’ istisna contract (supplier contract) is an agreement in which the price of an asset is paid in advance but the asset is manufactured or otherwise produced and delivered at a later date. This type of contract is typically used in the manufacturing and construction sectors.

• Bai’ istijrar contract (also a type of supplier contract) refers to an agreement between a purchaser and a supplier whereby the supplier agrees to deliver a specified product on a periodic schedule at an agreed-upon price rather than an agreed-upon mode of payment by the purchaser.

• Bai’ inah contract (sale and buyback contract) involves the sale and buyback of an asset. The seller sells the asset on a cash basis, but the

purchaser buys back the asset at a price higher than the cash price on a deferred basis. This type of contract is primarily used in Malaysia for cash financing; it is also used for Islamic credit cards.

Contract of Usufruct. Usufruct contracts govern the legal right to use and profit or benefit from property that belongs to another person. The key usufruct contracts in practice in Islamic banking are the following:

• Ijarah (leasing) refers to an arrangement in which a bank (the lessor) leases equipment, a building, or other facilities to a client (the lessee) at an agreedupon rental fee and for a specified duration. Ownership of the equipment remains in the hands of the lessor.

• Al-ijarah thumma al-bai (leasing and subsequent purchase) is a type of

ijarah contract in combination with a bai (purchase) contract. Under the terms of the ijarah (leasing) contract, the lessee leases the goods from the owner, or lessor, at an agreed-upon rental fee for a specified period of time. Upon expiry of the leasing period, the lessee enters into the bai

contract to purchase the goods from the lessor at an agreed-upon price. This concept is similar to a hire/purchase contract or closed-end leasing as practiced by conventional banks.

• Ijarah muntahia bittamleek (buyback leasing) involves an ijarah (leasing) contract that includes a guarantee by the lessor to transfer the ownership in the leased property to the lessee, either at the end of the term of the ijarah

period or by stages during the term of the contract.

Gratuitous Contracts. A gratuitous contract is entered into for a benevolent purpose, such as for making a charitable donation. The following are the gratuitous contracts currently used by Islamic banks:

• Hibah refers to a gift awarded by a bank without any commensurate exchange. For example, a bank gives hibah to a savings account holder as a token of appreciation for keeping money in the account.

• Qard involves an interest-free loan that is extended as good will or on a benevolent basis. The borrower is required to repay only the principal amount of the loan. The borrower may choose to pay an extra amount, however, as a token of appreciation for the lender. No extra payment over the principal amount can be charged by the bank; any such extra charge is considered riba (charged interest), which is prohibited under Islamic law. These loans are intended for individual clients in financial distress.

• Ibra occurs when a bank withdraws its right to collect payment from a borrower. The computation of ibra, a rebate, is based on the terms and conditions set forth in the governing contract.

Participation Contracts. Shari’a, in order to promote risk-andreward sharing consistent with the principles of Islam, encourages wealth creation from partnership arrangements that are governed by the following types of participation contracts:

• Mudharabah (trust financing) is a partnership between a bank and a customer in which the bank provides the capital for a project and the

customer or entrepreneur uses his or her expertise to manage the investment. Profits arising from the investment are shared between the bank and the entrepreneur on the basis of an agreed-upon profit-sharing ratio. If the project results in a loss, it is borne solely by the bank.

• Musyarakah (partnership financing) refers to an investment partnership in which all partners share in a project’s profits on the basis of a specified ratio but losses are shared in proportion to the amount of capital invested. All parties to the contract are entitled to participate in the management of the investment, but they are not required to do so. A musyarakah mutanaqisah (diminishing partnership) is an agreement in which the customer (the partner of the bank) eventually becomes the complete and sole owner of the investment for which the bank has provided the funds. The profits generated by the investment are distributed to the bank on the basis of its share of the profits and also a predetermined portion of the customer’s profits. The payment of this portion of the customer’s share of profits results in reducing the bank’s ownership in the investment.

• Musaqat, a form of musyarakah, refers to an arrangement between a farmer, or garden owner, and a worker who agrees to water the garden and perform other chores in support of a bountiful harvest. The harvest is shared among all parties according to their respective contributions.

Supporting Contracts. The supporting contracts used in Islamic banking include the following:

• Kafalah contract (guaranteed contract) refers to a contract in which the contracting party or any third party guarantees the performance of the contract terms by the contracting party.

• Rahnu (collateralized financing) is an arrangement whereby a valuable asset is placed as collateral for payment of an obligation. If the debtor fails to make the payments specified in the contract, the creditor can dispose of the asset to settle the debt. Any surplus after the settlement of the sale is returned to the owner of the asset.

• Hiwalah (remittance) involves a transfer of funds/debt from the depositor’s/ debtor’s account to the receiver’s/creditor’s account; a commission may be charged for the service. This contract is used for settling international accounts by book transfers. It obviates, to a large extent, the necessity of a physical transfer of cash. Examples are a bill of exchange and a promissory note.

• Wakalah (nominating another person to act) deals with a situation in which a representative is appointed to undertake transactions on another person’s behalf, usually for a fee.

• Wadiah contract (safekeeping contract) refers to a deposit of goods or funds with a person who is not the owner for safekeeping purposes. This type of contract is used for savings and current accounts in Islamic banks. Because wadiah is a trust, the depository institution (bank) becomes the

guarantor of the funds, thus guaranteeing repayment of the entire amount of the deposit, or any part of it outstanding in the account of depositors, when demanded. The depositors are not entitled to any share of the profits earned on the funds deposited with the bank, but the bank may provide

hibah (a monetary gift) to the depositors as a token of appreciation for keeping the money with the bank.

• Jualah contract (a unilateral contract for a task) is an agreement in which a reward, such as a wage or a stipend, is promised for the accomplishment of a specified task or service. In Islamic banking, this type of contract applies to bank charges and commissions for services rendered by the bank.

Shari’a provides the foundation for modern Shari’a-compliant economic and financial transactions. Thus, Shari’a supplies the philosophy and principles underpinning Islamic banking products and services. Islamic banking, based on Islamic law, is an integral part of the attempt to develop the Islamic ideal in social and economic terms. The Islamic legal system possesses a certain flexibility that provides for adaptation to new socioeconomic situations in that Islamic law deals differently with permanent aspects of legal issues and changeable aspects of legal issues. Islamic law allows room for reasoning and reinterpretation in areas of law that are changeable and progressive in character. For example, riba (interest) is a fixed prohibition whereas the ruling of permissibility for gharar (uncertainty) takes into account a cost–benefit analysis. Hence, permissibility changes with changing technology, the legal framework, customary practice, and so forth (Shanmugam and Zahari, 2009).

B. Service Quality Concept

Quality is one of the dimensions that determine the satisfaction rating. According to Kotler (2008:174) the quality is the totality of features and characteristics of products or services that have the ability to satisfy the desires expressed directly or indirectly. This means shows that the features determining the quality of products or services which satisfy customer needs. Quality can be detected by comparing consumer perception of service consisting of real services that they receive the services they really hope for, where consumer perceptions of consumers’ conclusions derived mainly from his experiences using the products or services concerned.

Definition of quality services centered on efforts to meet the needs and desires of customers and delivery accuracy to offset customers' expectations. Understanding quality of service according to Wyckof in Lovelock, quoted by Tjiptono (2006; 59) is the expected level of excellence and control over the level of excellence to meet the customer. In other words there are two main factors that affect the quality of services, namely Expected service and perceived service (Parasuraman, et al., Cited by Tjiptono, 2006; 60).

If the services received or perceived as expected, then the perceived service quality (perceived service) good and satisfactory. If the services received exceed customer expectations, then the perceived service quality as an ideal quality. Conversely, if the services received is lower than expected, then the perceived poor quality of services. Thus good or bad quality of service depends on the ability of service providers in meeting customer expectations consistently.

In subsequent developments, in Fitzsimmons et al Parasuraman, Zeithaml and Bitner cited by Tjiptono (2006: 70) found that there are ten dimensions can be summarized into just five main dimensions. The five principal dimensions include: 1) direct evidence (tangibles), including physical facilities, equipment, personnel, and means of communication. 2) Reliability (reliability), the ability to provide the promised services quickly, accurately, and satisfying. 3) Responsiveness (responsiveness), namely the desire of staff to assist customers and provide service with a response. 4) Assurance (assurance), including the knowledge, ability, courtesy, and trustworthiness are owned by the staff; free from danger, risk, or doubt. 5) Empathy (empathy), including ease of doing relationships, good communication, personal attention, and understand the needs of its customers.

Formation of philosophy based on Islamic banking has not been described above, so it is important to add dimension to the dimensions of service quality compliance. Use of service quality dimensions (SERVQUAL) on Islamic banking (Othman and Owen, 2002). With the aim to obtain an additional view of how services will be improved, try to develop an alternative model, called by CARTER. This discussion has been formed on the dimensions of service quality compliance factor. The results obtained from this analysis that has been shown by the CARTER model which is a dimensional variable consisting of six dimensions. The results showed that customers of Islamic banking compliance using the dimensions, because it is very important to follow the principle of Islamic banking in Islamic law.

Previous research conducted by the Erol and El-Bdour (1989) in Amin and Isa (2008) has explained that the religious factor has no role in selecting the Islamic Bank in Jordan. In Malaysia, 40 percent of Muslims are encouraged to use Islamic banking with the aim of a compliance factor (Haron et. Al, 1994 in Amin and Isa, 2008). It was explained that the factor of compliance with the principles of Islam shown an important role in Malaysia in determining the decision to select the bank. Meanwhile, the orientation of an advantage over Singapore motivate people to use the product and service of Islam and Muslims in Singapore further assess the existence of Islamic banks compared to non-Muslim citizens in Singapore (Gerrard and Cunningham, 1997 in Amin and Isa, 2008). Karatape et al, 2005 in Amin and Isa (2008) revealed that the level of service quality measures the development in one country that produces quality services in other cultures.

C. Service Quality Attributes of Retail Banking

In order to develop marketing strategy, service marketers, especially bank marketers need to understand the service attributes that used by consumers in selecting bank. For example, consumers would use bank reputation, bank reliability, bank assurance, and physical facilities of the bank in selecting bank services. If marketers can understand which attributes are used to evaluate a service, they will be better able to manage and influence the customer's evaluations and perception of the offering (Crane and Clarke, 2000).

Perceived quality of service tends to play an important role in high involvement industries like banking services. Banks have traditionally placed a

high value on customer relationships with both commercial and retail customers. In the last ten years, the nature of customer relationships in retail banking in Indonesia has been changing, especially since the advent of automatic teller machines. A survey that conducted by ISMS (2005) shows that 90% of retail banking customers in Jakarta use both bank branches and ATMs in their relationship with banks. Therefore, service quality may well be measured in terms of both personal support and technical support.

The measurement of perceived service quality may remain a challenge. Previous research suggested that the dimensionality of service quality might depend on the type of services under study (Cronin and Taylor, 1992; Babakus and Boller, 1992). Based on this background, studies have investigated various attributes, which determine consumers' perception of service quality of retail banking industry (Sureschandar et al., 2002).

A study of service quality in bank setting by Avkiran (1994) in Amin and Isa (2008) was conducted to develop an instrument for measuring customer service quality as perceived by bank branch customers. He designed and examined six-dimension model for service quality in banking industry (responsiveness, empathy, staff conduct, access, communication, and reliability) with 27items.

The six dimensions conceptualized at the start with 27 items were empirically reduced to 17 items across four discriminating factors. The dimensions which emerged were staff conduct, credibility, communication, and access to teller services. The exploratory study conducted by Stafford (1996)

reported the distinct elements (attributes) of bank service quality as perceived by customers. Seven attributes were found in assessing bank service quality.

The first attribute, named "bank atmosphere"; included cleanliness, as well as an overall positive and courteous attitude by employees (kindness, friendliness, and pleasantness). The second attribute, 'relationship", indicates the importance of a personal relationship with the bank employees, where customers are recognized easily by long-term employee.

The third attribute, "rates and charges", indicates that low costs and high interest rates can affect an individual's perception of bank service quality.

The fourth attributes, "available and convenient services", indicates a full array of services that available, easily accessible and convenient. The fifth attribute, "ATMs", indicates available, convenient, and working automatic teller machines. The sixth attribute, "reliability/honesty", indicates the importance of a solid bank rating and honest, reliable employee. The seventh attribute, "teller", indicates adequate and accessible teller.

Bahia and Nantel (2000) conducted a study to develop a reliable and valid scale for the measurement of the perceived service quality of retail banking in Canada. They argued that the universality of the five dimensions of SERVQUAL across different types of services had been questioned in a number of subsequent studies (Amin and Isa, 2008). They also argued that these five dimensions are not fully generic. As found by Carman (1990) in Amin and Isa (2008), it is often necessary to incorporate additional items to dimensions because they are particularly important for some service categories. Another critique addressed to

SERVQUAL since it has focused on the first marketing mix element (i.e. product) to improve quality.

Further they developed a measurement of perceived service quality with reference to Parasuraman et al in Amin and Isa (2008) original ten dimensions and some additional items which are important to retail banking service, then they purified and tested the measurement scale. Based on this procedure, they proposed a scale that was called as bank service quality (BSQ).

The BSQ comprises 31 items, which span six dimensions: effectiveness and assurance, access, price, tangibles, service portfolio, and reliability. Sureschandar, Rajendran, and Anantharaman (2002) aspired to develop an empirical model of service quality with a specific focus on the banking sector. The objectives of their study are: (1) to identify the critical factors of service quality from the customers' perspective; (2) to develop an instrument to measure customer-perceived service quality based on the identified factors with a specific focus on the banking sector; (3) to empirically test the proposed instrument for unidimensionality, reliability and validity using a confirmatory factor analysis approach. They proposed the 5 critical factors of service quality from the customers' perspective i.e. human element of service delivery, core service or service product, systematization of service delivery, tangibles of service (servicescapes), and corporate social image. These factors resulted from modifying the original SERVQUAL instrument, by adding and/or reducing other relevant factors. The result of empirically tests for unidimensionality, reliability, and validity show that all the five factors of customer perceived service quality

have strong evidence for unidimensionality, reliability, convergent discriminant, and criterion-related validities.

D. Customer Satisfaction

The basic purpose of a business is able to create customer satisfaction, because if the customer satisfaction can be created then this will bring some benefits to customers and also business people. Among the relationship between consumers and companies become harmonious, providing a good basis for re-purchase, forming a recommendation by word of mouth and ultimately consumers will become loyal to the company. General understanding of consumer satisfaction or dissatisfaction is the result of the differences between consumer expectations with performance that is perceived by the consumer.

Customer satisfaction is an output, resulting from the comparison of the consumer after making a purchase from an expectation of performance with actual performance and the emergence of cost (Churchill and Surprenant, 1982 in Aydin, Özer and Orasil, 2005). The theory of customer satisfaction used in two different ways of transaction and general (Yi, 1991 in Aydin, Özer and Orasil, 2005). The concept of special transactions associated with customer satisfaction as a form of judgments made after a specific purchase goal. Customer satisfaction refers to the assessment of overall consumer to a brand, based on attendance and experience (Johnson and Fornell, 1991 in Aydin, Özer and Orasil, 2005). In fact, all forms of satisfaction is seen as a function of the entire satisfaction of certain transactions (Jones and Suh, 2000 in Aydin, Özer and Orasil, 2005).

Customer satisfaction as a whole represent all forms of evaluation which is based on the total purchases and consumer experiences with products or services within a given time. Is where the satisfaction of the special transaction will provide a diagnostic information about a particular product or service delivery, a whole satisfaction is more a measurement of a base of experience with companies in the past, present and future performance (Anderson, 1994 in Aydin, Özer and Orasil, 2005). This is because the consumers’ conducts repurchase evaluations and decisions based on the purchase and consumption of existing experience, not only on a particular transaction or episode (Johnson, et al, 2001, p. 219 in Aydin, Özer and Orasil, 2005).

Customer satisfaction is very dependent on the views and expectations of the consumer or the consumer itself. Needs and desires are perceived by consumers when purchasing a product or service, past experience when using the product or service, as well as the experiences of colleagues, friends, or relatives who have used these products or services, and also advertising, can said to be the factors that can provide a very important influence on the views and expectations of consumers when buying a product or service. Of the several explanations that exist about the customer satisfaction that has been researched and defined by experts marketing, it can be concluded that customer satisfaction is a response to consumer behavior that can be viewed in full purchasing evaluation form to a product or service that he felt (product performance) compared with consumers. From the above definition can be concluded that customer satisfaction is a feeling

of pleasure or disappointment resulting from comparing one product display in relation to expectations.

E. The Effect of Satisfied and Dissatisfied Customer

Many company often neglected the customer satisfaction, their orientation is only to sell as many products and services as they can, in order to get higher profit. In fact, good customer satisfaction has an effect on the profitability of nearly every business.

Gitomer (1998) in Meng & Elliot (2009, p.59) stated the cost of gaining a new customer is ten times greater than the costs of keeping a satisfied customer.

Irawan (2002, p.9) believes that satisfied customers are a good mouth to mouth recommendation and promotion, while unsatisfied customers will spread their bad experiences to others.

To illustrate the situation, when customer receive good service and satisfied with the company, each will typically tell nine to ten people, but if they are not satisfied, they will also tell their bad experiences to fifteen to twenty people. For that reason, we can not afford to let our customers dissatisfied and tell to other. However, once customers have been delighted, their expectations are raised. They will be dissatisfied if the service levels return to the previous level and it will definitely take more effort to delight them in the future.

Customer expectations are influenced by several factors (Zeithaml, Bitner, & Gremler (2009):

1. Informal recommendations.

Word of mouth communications, customers tend to have a higher expectation of a specific that has been recommended to them by family or friends.

2. Formal recommendations

Recommendations of agents found in certain publications 3. Personal need.

Each customer has different needs for each service. Therefore, this need also influences customers to judge the quality of the service, and whether or not it has satisfied their needs.

4. Past experience.

Customers with different past experiences with that specific service type seem to have different expectations of the service.

5. Price.

The price to be paid for a service determines, in the customer’s mind, the level of quality to be demanded.

6. All elements of promotional mix.

These elements convey a message to the customer that has an influence on expectation.

7. Good corporate image.

It is very important asset because it positively shapes the expectations of the customers.

8. External communication.

The influence of messages sent out by service providers plays an important role on customer expectations. Customers will expect the service to be in keeping with the messages.

F. Measuring Customer Satisfaction

After discussing about customer satisfaction, the next question arise is, how to measure the customer satisfaction? Kotler (2008, p.41) discuss several ways to measure customers’ satisfaction:

1. Complaint and Suggestion System

The organization makes it easy for its customers to deliver suggestions and complaints. The media is suggestion boxes, comment cards or toll free telephone.

2. Customer Satisfaction Survey

Responsive companies obtain a direct measure of customer satisfaction by conducting periodic surveys. They send questionnaires or make telephone calls to random sample of their recent customers or make telephone calls to a random sample of their customer to find out their feel about various aspects of the company’s performance. Customer Satisfaction Survey is divided into 4 categories:

a. Directly Reported Satisfaction

The respondents are being asked directly with questions in order to know if they are very satisfied, satisfied, enough, dissatisfied, or very

dissatisfied. This survey is used to collect the customer opinion and needs which can give the result called the customer satisfaction index. This customer satisfaction index is the standard that the company needs to maintain.

b. Derived Dissatisfaction

The questions that being asked included in two aspects, how high is the customer expectation in the certain attribute, and how high is performance that customer’s feel of this attribute.

c. Problem Analysis

Respondents are being asked to describe two things; the problems which related with the company offers and the suggestion for improvement.

d. Importance-Performance Analysis

The respondent is asked to rate the services according to the customer importance and company performance in each attributes.

3. Ghost shopping

This method is to hire person to pose as potential buyers to report their finding on strong and weak points they experienced in buying the company’s and competitors’ products

4. Lost Customer Analysis

Companies contact customers who have stopped buying or who have switched to another suppliers to learn why this happened. Much of this interest has centered on the controversy generated by their service quality gaps model

Parasuraman (1985) in Kottler (2008), and particularly the SERVQUAL instrument developed to measure service quality (Parasuraman et al., 1988) in Chowdhary & Prakash (2007).

G. Customer Satisfaction Measurement Advantages

There are several advantages of measuring customer satisfaction (Blankenship, et al. 2008, p.308).

• Customer satisfaction results can help to present the current standing of customer satisfaction.

This utilization often goes beyond reporting statistical data such as mean, range, and standards deviation. These descriptive data can assist in identifying specific strengths and weakness in satisfaction dimensions, the specific items under each, as well as information about overall scores. However, different types of data analysis can be used to identify not only aggregate but also individual information. From here emerge the distinct patterns or gaps between different individuals, groups, or among particular items.

• Customer satisfaction results can help to identify important customer requirements. Identification of the specific customer requirements for achieving satisfaction is useful at a very fundamental level. An organization is able to clearly focus efforts in those areas that are most important to the customer. Distinguishing those requirements most valued by customers allows for pinpointing efforts for service modifications as well as further data

collection. Comparisons of specific items to the satisfaction dimension or overall score can assist in determination of those items that are more closely linked with satisfaction.

• Customer satisfaction results can help to monitor customer satisfaction results over time.

Quite simply, the same information gathered at different points in time can assist in identification of trends and patterns that develop as an organization evolves and changes. Furthermore, this can be helpful in demonstrating the levels of effectiveness of interventions, services and so forth at particular points in history. What may work during a certain point in time may not at another? This temporal collections and comparison of information allows for an organization to adapt and modify services and products to meet the changing requirements of its customers.

• Customer satisfaction results can help to provide comparisons to other organizations.

Comparisons either within an organization by department or sub-group as well as with outside agencies can provide a wealth of information. This includes not only structural and organizational strengths and weaknesses, but also effectiveness of service components and service delivery. This can assist in coordination of planned changes specific to each area, as opposed to general, “blanket” approaches. Also, this can give a perspective of how one organization is performing in relation to others, namely one’s competition.

This gives the customer the information necessary to make informed choices and selections.

• Customer satisfaction results can help to determine the effectiveness of business practices.

Data gathered from customer satisfaction studies can provide valuable and accurate information that can assist in evaluation of service components and delivery. Services can be altered to become more effective, and business practices can be altered to meet the standards of excellence within a certain business. In essence this is the comparison of a particular item against a standard predetermined by the customer. Those scores above the standard are positive, while those below are in need of improvement. This enables more thoughtful and considered prioritization of any possible plans of action. The message is clear: customer satisfaction is essential for the success and continued success of any business. Not only does positive customer satisfaction help business, but also a lack of satisfaction takes an even bigger toll on the bottom line. For a company to remain solvent, information regarding customer satisfaction must be adequately collected and analyzed.

H. Consideration Framework

SERVQUAL dimensions are variable in the study revealed the level of customer satisfaction and reliability dimension having the highest impact at all levels of customer satisfaction assessment (Arasly et al, 2005 in Amin and Isa, 2008). The discussion is based on the disclosure there is a strong influence

between SERVQUAL and customer satisfaction (Othman and Owen, 2001 in Amin and Isa, 2008). Service quality or service quality which consists of tangible, reliability, responsiveness, assurance, empathy, and compliance has a close relationship with customer satisfaction. Quality provides an incentive to customers to establish strong ties with the company. In the long-term commitments as this allows the company to thoroughly understand customers' expectations and their needs. Thus, companies can increase customer satisfaction where the company maximizes its customers an enjoyable experience and minimizing or eliminating the customer experience less enjoyable. In turn, customer satisfactions to create customer loyalty to companies that provide satisfactory quality.

Likewise in the banking sector, which must be undertaken by a bank, is to provide a quality service. This service forms one of which is chargeable to employees who meet directly with customers is more intense because transactions conducted over the many and varied. If the elements of services provided for employees of Bank Syariah make our customers comfortable and in accordance with what was expected by the client before, then the customer is satisfied with the services provided. Likewise, if customers feel the service performance of Bank employees more than what was expected previously, the customer was very satisfied, therefore the quality of services provided by the Bank Syariah influence on customer satisfaction levels. With good service quality expected a strong relationship existed between the Bank Syariah with its customers. Thus the bank can increase the satisfaction of its customers who in turn can create customer

satisfaction (customer satisfaction) to the bank that has been providing quality service.

Figure 2

Theoretical Framework

Customer Satisfaction Service Quality

Tangible Reliability Responsiveness

Assurance Empathy Compliance

I. Hypothesis

Previous research has identified various factors that determine the level of customer satisfaction. Bank of Greece in Turkey using the quality of services to achieve the level of customer satisfaction. Dimension of SERVQUAL is a variable in the study revealed the level of customer satisfaction and reliability dimension having the highest impact at all levels of customer satisfaction assessment (Arasly et al, 2005). The discussion is based on the disclosure there is a strong influence between SERVQUAL and customer satisfaction (Othman and Owen, 2001).

Results from previous research conducted by Amin and Isa (2008) using a sample of students at Bahrain, indicating that younger customers revealed several factors, such as a bank's reputation, bank employees are friendly, the location of affordable, possess 24-hour ATM, and the availability of a vast parking lot in

choosing a bank (Almossawi, 2001). Bank's ability to deliver the benefits of an influence of toward bank customer satisfaction level has an innovative method of customer satisfaction levels, such as internet banking only, and the system via Internet, telephone and call center. Based on the disclosure Leveque and McDougall (1996), satisfaction and competitive rivalry of the bank are two important factors that are usually used to influence all levels of satisfaction from a customer.

Robust formation of the importance of service quality perception and influence between service quality and customer satisfaction led researchers and academics describe the level of customer satisfaction as factors related to the level of previous studies of service quality and others that reveal the level of service quality as a factor in shaping the level of previous research, customer satisfaction (Amin and Isa, 2008).

The conceptual model is demonstrated and tested as Figure 2. This model starts with SERVQUAL measurement scale, consisting of six dimensional structures: tangibles, reliability, responsiveness, assurance, and empathy, and compliance dimensions to measure Indonesian Islamic banking service quality. Furthermore, a conceptual model of the relationship between service quality and customer satisfaction (Figure 2) is developed based on the literature and hypotheses are explored. The hypotheses research is:

H1: There is significant influence between service quality toward customer satisfaction

CHAPTER III RESEARCH METHOD

The research design that will be use in this research is causal research, which explains about the causal relationship between research variables, the purposes to make a decision of relationship methods cause and effect from independent variables to dependent variables. On problem that discussed on chapter 1 about is there any influence of service quality customer satisfaction in Islamic Bank? Because of that research method is needed to answer those problem formulation based on the hypothesis that already discussed on chapter 2.

A. Research Scope

This research attempts to examine the effect of service dimensions/attributes on perceive service quality, and customer satisfaction based on the research questions which presented as follows:

1. Using a retail-banking services setting in Jakarta, what are the specific service

2. quality attributes that influence service quality.

3. Using a retail-banking services setting in Jakarta, what are the specific predictors (service quality attributes, customer value, or customer satisfaction) will influence customer satisfaction.

B. Sampling Method

The focus of this research is on the relationship between service quality attributes and customer satisfaction as dependent variables. As mentioned before, this research sample used non probability sampling. Not all the content or element of population have the same opportunity to become sample.

The purposive judgmental sampling was used where the collection of specialized informed respondent about Islamic bank (Sekaran, 2003). Respondents are the customers who visit the bank counters and have an account with one of the full-fledged Islamic banking.

C. Population Research

Data were gathered from personal interviews using questionnaire as a measurement tool, and it was conducted in Jakarta by 5 trained interviewers during two-month period in May until June 2010. The first part of the questionnaire focuses on customer perceptions of service quality attributes, which are the independent variables of this research. The second and third focus on customer satisfaction, which are dependent independent variables of this research. The third part of the questionnaire collects demographic data, such as gender, marital status, age, education, and occupation, and other information such as the length to be a customer of this bank, and how frequently do they have relationship with the bank. In determinining sample size, Sekaran (2003) proposes that sample

size larger than 30 and less than 500 are appropriate for most research. The questionnaires distributed are 150 questionnaires in which the questionnaires are returned and can be used total of 120 questionnaires.

D. Data Collection Methods

This research method did on May 2010 use collection and observation data, data is collected from Mandiri Syariah, Jakarta, there are:

1. Primary Data : Data is getting from the survey result with giving questioner to the respondent that suitable with the population characteristic of customer Mandiri Syariah. The sample of respondent was drawn from Pondok Kelapa Branch, Saharjo Branch, Rawamangun Branch, Meruya Branch and M.H Thamrin Branch of BSM.

2. Secondary Data : the general data is getting from the last research and literature about relationship influence services quality towards customer satisfaction

E. Analysis Method

This research method using the analysis method is the descriptive method. The purpose is to get some figure of descriptive or systematic outline, actual, accurate about the fact, also the phenomenon relationship that will be researched and explore.

The analysis method that will be use in this research to measure the customer satisfaction with the service quality is single regressions. The

independent variable (X) in this research is the service quality of Islamic Bank. The variables that are used to measure the service quality is 6 dimensions of service quality: Reliability, Responsiveness, Assurance, Empathy, Tangible and Compliance. The dependent variable (Y) is customers’ satisfaction with Mandiri Syariah throughout the experiences that they had. If the service quality provided is the same or exceed the customers’ expectation, the customers will be satisfied, and vice versa.

All indicators of the variables used in this research are illustrated in the following equation:

Y = βo + β1 X1 + ε

Where:

Y : Customers’ satisfaction level

βo : Y intercept

β1 : slope of Y with variables X1 (Service Quality) ε : random error in Y

E.1. Validity Analysis

Validity is the degree to which a measure accurately represents what it is opposed to (Hair, 2006). According to Nunnaly (1994), there are three type of validity that can be assessed: content validity, predictive validity, and construct validity. Content validity is the assessment of the correspondence between the individual items and the concept (Hair, 2006). The current study addressed content validity through the review of literature as presented in Chapter II, and

adapting instruments used in previous research. Predictive validity was not assessed in the current study. Construct validity of the three constructs (service quality attributes, customer value, and customer loyalty) in this study was evaluated by employing exploratory factor analysis using SPSS Release 15.

E.2. Reliability

There are several measures can be ascertained to establish the reliability of the instrument, such as test-retest method, equivalent forms, split-halves method and internal consistency method. Since all constructs in the model contain multiple items, except the customer satisfaction construct, the internal consistency method should be applied. It is estimated using Cronbach alpha with the acceptable cut off point of 0.70 (Nunnaly, 1994) for demonstrating that all attributes are internally consistent. With regard to validity and reliability analysis, the following is the description of the results for each constructs.

F. Operationalization of Variables

The five dimensions of SERVQUAL as proposed by Parasuraman et al. (1988), Othman and Owen (2001, 2002) and Jabnoun and Al-Tamimi (2003) were adapted and modified in this study. The modifications consisted of substituting questionnaire items particularly suited to a specific service industry (Islamic banking) and context (Malaysia). The original items were translated and modified into Indonesia language. The wording reflected the local Islamic context. A

point Likert scale was used to measure the perception of perceived quality which ranged from “1 strongly disagree” to “7 strongly agree”. To avoid the issues of conceptual and psychometric properties raised by Cronin and Taylor (1992) and Babakus and Boller (1992) by using different scores, and to be more efficient the researchers only had to measure perception of quality (Yavas et al., 2004).

In addition to the original SERVQUAL scale, relevant items from the Islamic banking service quality scale (Othman and Owen, 2001; Jabnoun and Al-Tamimi, 2003) were also adapted and incorporated. For example, compliance items one, two, three, and four are items from compliance aspects of the Islamic banking service quality scale (Othman and Owen, 2001). Subsequently, empathy items one, two, and three from the empathy dimension of commercial bank service quality were also incorporated in the current scale (Jabnoun and Al-Tamimi, 2003).

Studies on customer satisfaction within the banking sector measured the construct with multi-item measures (Fornell et al., 1996) that identified how satisfied a customer felt with products and services provided by Islamic banking. In addition, a seven-point scale ranging from “1 very un-satisfied” to “7 very satisfied” was used to measure the customer perception and assessment to overall satisfaction. Finally, demographic information and product knowledge of Islamic banking customers were elicited from the respondents.

The variable in this study are Service Quality and Customer Satisfaction. Quality Service consists of five dimensions of Parasuraman et. al, (1988), namely: Tangible, Reliability, Responsiveness, Assurance, Empathy, and added a

dimension of Compliance by Othman and Owen (2001) as an additional dimension of Islamic Banking.

Table 3.1

Service Quality Operationalization Variable (Independent)

Variable Dimension Indicator

Service Quality Tangible 1. Assessment of visually-related services.

2. The speed and efficiency of transactions visually. 3. Opening hours are

convenient and flexible.

Reliability 1. Bank Syariah store data

accurately.

2. Bank employees provide services in accordance with the promised time. 3. When having problems,

the Bank trying to solve the problem with good and cooperative.

4. Available products and services of the Bank that adequate.

5. Availability of facilities

takaful products (insurance).

Responsiveness 1. Employees want to

always help the customer. 2. The employees of the

bank responsive to customer demand related to what was promised. 3. Services at the counter

quickly and efficiently. 4. The Bank has many

branches.

Assurance 1. Bank employees who

work as staff were honest and friendly.

2. Bank employees have the appropriate knowledge and provide the necessary answers.

3. The Bank provides its customer’s data is confidential.

4. The Bank provides financial consulting.

Empathy 1. The availability of internet banking facilities. 2. The availability of ATM

machines within easy reach.

3. Availability of 24-hour ATM services.

4. Availability of credit. 5. Bank employees may

attract your attention. 6. The Bank provides low

cost services.

Compliance 1. The lack of interest on

any transaction conducted.

2. Availability of zakat payment facility (without the added tax).

3. Sharing of profits on investment products. 4. The lack of interest on

the loan. Source : Amin and Isa (2008)

Table 3.2

Customer Satisfaction Operationalization Variable (Dependent)

Variable Indicator Customer Satisfaction 1. The lack of interest on any

transaction conducted.

2. Availability of zakat payment facility (without the added tax). 3. Sharing of profits on investment

products.

4. The lack of interest on the loan.

Source : Amin and Isa (2008)

CHAPTER IV ANALYSIS

In this chapter, the researcher will provide the descriptive statistics and hypothesis testing according to the type of data and methods that have been explained in the previous chapter.

A. Respondent Characteristic

Table 4.1

Respondent’s Characteristics According to Gender

Source: questionnaire

Characteristic Frequency Percentage (%) Gender :

Male Female

45 75

38 62

Total 120 persons 100

From the table above, it can be concluded that the majority gender is female with 75 persons from a total of 120 respondents or 62 % from all respondents. While the male gender is 45 persons from a total of 120 respondents or 38 % form all respondents.

Table 4.2

Respondent’s Characteristics According to Age

Source: questionnaire

Characteristic Frequency Percentage (%) Age :

<25 years old 25-35 years old 35-40 years old >40 years old

6 24 42 48

5 20 36 40

Total 120 persons 100

From the table above, it can be concluded that the majority age is >40 years old with 48 persons from a total of 120 respondents or 40 % from all respondents. While 35-40 years old has 42 persons from a total of 120 respondents or 36 %

test the constructs framework that customer satisfaction was influenced by the perception of Islamic banking service quality.

The results confirmed that the six dimensions (tangible, reliability, responsiveness, assurance, empathy, and compliance withSyariah) are distinct constructs. The results indicated that Islamic banking service quality consisting of six dimensions has appropriate reliability and each dimensions has a positive significant relationship with Islamic banking service quality. For Malaysian Islamic banking service quality, reliability was the key driver of service quality, followed by empathy, tangible, responsiveness, assurance, and compliance, respectively. Reliability had the highest regression coefficient (0.999). It means that Muslim and non-Muslim customers are looking for banks that provide services at the promised time, are able to solve problem and cooperative, and offer a wide range of products and services. In other words, Malaysian Muslim and non-Muslim customers more concerned with the reliability dimension than other dimensions as a key factor in establishing relationship with their banks. This result is consistent with Parasuramanet al.(1988, 1991) in that reliability was found to be the most important factor to service quality. Meanwhile, similar results were found in UAE Islamic banking in that the reliability was the most important dimension (Al-Tamimi and Al-Amiri, 2003).

In addition to relationships between service quality and customer satisfaction, prior research suggested that service quality has a positive relationship with customer satisfaction (Parasuramanet al., 1988, 1991). The findings of this study indicate that the establishment of higher levels of service quality will lead customer to have a high level of satisfaction. As a result, these indicate that service quality is positively associated with customer satisfaction in Malaysian Islamic banking. In addition, the findings of this study are consistent with previous studies by Othman and Owen (2001) who stated that there was a strong link between service quality and customer satisfaction in Islamic banking. Araslyet al.(2005a, b) found service quality to be a significant predictor of customer satisfaction in Turkey’s banking industry. Additionally, Karatapeet al.(2005) identified that service quality has the strongest effect on satisfaction since satisfaction is a mediator between service quality and purchase intention in conventional banking. The literature suggests that the implication is clear, the better the service quality, the higher is the customer satisfaction.

Althogh Islamic banking customers are satisfied with the overall service quality provided by their banks, it is not guaranteed that their customers do not switch to other banks. Therefore, Islamic banks need to improve the relationship between bank and customers, and this is based on customer trust towards the principles ofShariah (compliance) used in creating that relationship. In the Malaysian banking context, Muslim customers’ trust in Islamic banks may be linked to customers perceiving that products and services are running withShariah principles. One explanation for this could be that respondents may have believed and felt that the operations of Islamic banking system are consistent with Islamic principles, as the mechanisms to ensure that Islamic banks are Syariahcompliance are numerous. The legitimate of Islamic banks operations are strongly backed up by the Central Bank of Malaysia andSyariah Advisory Council to assist and supervise the compliance aspects. This confidence is based on the customer’s belief that Malaysian governance rules sufficiently supervise Islamic banks. This has significant impact on consumer behavior decisions and influences their perceptions towards Islamic banks.

Service quality

perception

Implications for management

In addition to the responses of attitudes towards Islamic banking, there were no significant differences between Muslim and non-Muslim customers. In the context of the history banking relationship, most of them have had banking experience and dealt with Islamic banking for more than one year. The greater the number of years relationship between customers with their banks, the higher degree of their customers in holding the bank accounts. It is advantageous for Islamic banking to maintain a long-term relationship with their customers.

In general, this study highlights that Malaysian consumers are more satisfied with products and services provided by fully-fledged Islamic banking and dual-window banking. In fact, reliability and empathy dimensions were the main important factors of service quality in Malaysian Islamic banks. Therefore, Islamic banks may be required to do more promotion and focus on strategic choice in providing products and services which are more innovative in order to gain competitive advantage. Islamic banking should provide financial counseling to attract Muslim customers to use more Islamic banking products and services where 60 percent of the Malaysian population is Muslim. There is a potential target market for which Islamic banking should be concerned. Today, high competitiveness and availability of products and services and innovation in a global banking market, requires that Islamic banking has no choice but to focus on attracting, developing, and retaining customer satisfaction. It can be achieved if Islamic banking has good information about the level of bank customer satisfaction. In fact, the prerequisite of high-quality service may be a differentiation strategy in enhancing customer satisfaction.

Limitations and further research

Further research should be considered to gather more information regarding the service quality and customers’ satisfaction dimensions in context of the Malaysian Islamic banking industry. The limitation of this study was the difficulty in approaching the respondents for the dual-window banking. This is due to their office hours. The borders between the Islamic bank and conventional bank customers exist. It was different with the fully-fledged Islamic banking in that we could automatically identify the customers. The potential of the inaccurate data collection exists due to the questionnaires that were distributed through the branch managers. For further research, the researchers need to increase the number of banks involved in the research study, the number of respondent, and the research should represent the whole Malaysia.

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Further reading

Teas, R.K. (1994), “Expectations as a comparison standard in measuring service quality: an assessment of a reassessment”,Journal of Marketing, Vol. 58 No. 1, pp. 132-9.

Corresponding author

Muslim Amin can be contacted at: tengkumuslim@yahoo.com

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