Why do customers patronize Islamic banks? A case study of Pakistan

Abstract

PurposeThe purpose of this paper is to determine the selection criteria for Islamic banks employed by customers in a dual banking system, as in the case of Pakistan, and to know the overall satisfaction of the customers with Islamic banks.Design/methodology/approachThis is a survey‐based study conducted on the primary data collected through structured questionnaire. In total, 23 variables are identified from the literature which are reduced to eight main variables by using factor analysis in SPSS. Data are gathered from 200 customers of full‐fledged Islamic banks in Pakistan, i.e. Meezan bank, Bank Islami and Dubai Islamic bank, Al‐Baraka Islamic bank, Burj Bank Ltd The data have been analyzed in two models: the first includes the selection criteria according to gender; the second includes the overall customer's preferences for selection criteria.FindingsThe results reveal that the most important factors are “Religious factors” and “Convenient location” that customers consider while selecting an Islamic bank. Other important factors include “Secure feeling” by customer, “Quality related issues” and “Efficiency of bank”.Research limitations/implicationsThe data used in this study are limited, so the generalization of the results is not possible. Also the study is conducted on the full‐fledged Islamic banks and it has ignored the Islamic Windows.Practical implicationsConsidering the importance of the topic, this research has identified the selection criteria that are considered by the customer while selecting an Islamic bank. It will help banks to improve the criteria said and considered by customers while selecting a bank. This research will be of interest to both serving banks and potential entrants into this niche market.Originality/valueThe literature shows that patronize factors of Islamic banks are an under‐researched area in Pakistan. So, this paper will contribute to the body of knowledge by identifying the Islamic banking selection criteria considered by the customers.