Reviewing the indicators that determine a banks reputation

Reviewing the indicators that determine a banks reputation

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In this chapter two is about literature review. I will review other journals that relevant to this research topic. In the 2.2, those journals are investigating the demographic affect the consumers' satisfaction level. In the 2.3, those journals are investigating the quality of services. In the 2.4, those journals are discussing staff's attitude. In the 2.5, those journals are indicating rate of return. In the 2.6, those journals are investigating professional advice. In the 2.7, those journals are discussing convenience. In the 2.8, those journals are indicating internet banking. In the 2.9, those journals are discussing bank's reputation.

2.2 DEMOGRAPHIC

Researchers have found the demographic as a vital tool for market segmentation to investigating target customers and their needs. Demographic variables which are gender, age, household income, educational level, and occupation are considered to be important role in customers' adoption behaviour in banking. (Wan, Luk, & Chow, 2005)

2.2.1 RELIGION AND KNOWLEDGE

According to Haque, Osman, and Ismail (2009), religion and knowledge are playing an important role to select a bank. Researcher found that most of the customer lack of knowledge about the Islamic banking products like Muderaba, Murabahah, Wadiah etc., but they will buy these products for the reason of religion.

Metawa and Almossawi (1998) found the religion was the primary factor affect customers' perception in the selection of Islamic banking system and not the return on their investment. The reason is most of the customers were recognising from the fundamental products and services of Islamic banks but they dun have the knowledge about complex Islamic financial system.

Naser et al., (1999) do a research showed that most of the customers just have a little knowledge about the specific products like Mudarabah and Murabahah. But most of the customers do not use these products before.

Jorg Bley and Kermit Kuehn (2004) showed that the religion was influential the customers were selecting Islamic banks. Islamic banking system is constrained by the rule of Syariah and it is under Islamic law. Therefore most of the Muslim was using Islamic bank's products and services. From the survey, found that there is 85.2 percent of Muslims' customers and only 44.1 percent of non-Muslim' customers are interesting in Islamic finance.

2.2.2 AGE GROUP

Kangis and Voukelatos (1997) showed that the majority of younger age group between 18 to 24 years of age treasured the good appearance of staff and the short time of queuing. Young adults 25 to 34 years of age appreciated the modern of equipment, problem solving, willingness of staff to help, explanations of the services provided, staff's friendliness, manners, staff's professional advice and the location of the branch. Mature adults between 35 to 45 years of age as well as the other older age groups appreciated distinct in their perceptions for most dimensions, other than generally looking for a reduction in queuing time.

Boyd et al (1994) explored the importance of bank selection criteria in term of the age of the head of the household. They found that for the age group under 21 years, a bank's reputation plays a major role in determining their bank selection, followed by location, hours of operation, interest on savings accounts and the provision of convenient and quick services. The least important factors for this age group were found to be the friendliness of bank employees and the modern nature of their facilities.

Mathur and Moschis (1994) found that age is conversely related to credit card use. The younger adults use credit cards significantly more than older adults.

According to Owusu-Frimpong (1999) studied the patronage behaviour of Ghanaian bank customers are considered three important variables in the customers' demographic which is age, sex, and occupation. They found that the age group between 30 to 50 years of age is belonging to their main portion of customers.

2.2.3 GENDER

Boyd et al (1994) found that gender will affect the customers' view towards bank selection. Research showed that most of the males are more focus on the faster service and convenience. By the contrary, female putting important to longer- term aspects relating to organizing their finances and becoming more financially secure.

2.2.4 INCOME LEVEL

Khan, Hassan, and Shahid (2007) found that the bank customers with lower levels of income incline to depend on the recommendations of friends and family in selecting a bank. On the contrary, bank customers in the higher income are choosing Islamic banks mainly for the religious reasons. The customers in higher income levels trend to depend on convenient location of the bank in making bank selection decisions.

2.3 QUALITY OF SERVICES

Lewis and Booms, (1983); Lehtinen and Lehtinen, (1982); Gronroos, (1984); Parasuraman et al., (1985, 1988, 1994) stated service quality is the outcome of the comparison customers make between the services what they expect (expectation) and what they actually receive (perception). Cronin and Taylor, (1992) said that service quality is an important factor of customer satisfaction.

Parasuraman et al. (1988) used the SERVQUAL method to measuring the service quality of a firm and representing five dimensions: reliability, responsiveness, tangibles, assurance, and empathy.

According to Othman and Owen (2001a), the SERVQUAL was affords technology techniques for measuring and managing service quality. So it has proven to be the most popular tools for measuring service quality. Compared to other service industries, Islamic banking industry operate under different principles and cultures. Therefore an extra dimension must be added to the SERVQUAL method. The developed an instrument called CARTER. It is to measure service quality in Islamic banking. Besides that, to the existing five dimensions in SERVQUAL; CARTER combines with an extra dimension which is "Compliance with Islamic Law". This five dimensions which are run-on Islamic law and principles, no interest neither paid nor taken on savings and loans, provision of Islamic products and services, provision of free interest loans and provision of profit- sharing products.

Kuwait Finance House (KFH), Othman and Owen (2001b) used this model to measure and managing the important of service quality in the Islamic banking industry. They found that quality, satisfaction and service encounter have a positive link. The finding certified the legality of this model for measuring quality of services in Islamic banks. Furthermore, all of CARTER's six dimensions were rated highly by KFH customers. CARTER's six dimensions were conceptualised as a proposed framework for measuring quality of services in Islamic banks.

Table 1: CARTER's six dimensions as follows:

DIMENSIONS

DEFINITION

COMPLIANCE

Means the ability to comply with Islamic Law and operate under the principles of Islamic banking and economy.

ASSURANCE

Means the knowledge and courtesy of employees and their ability to convery trust and confidence. It also includes verbal and written communication between bank staff and customers.

RELIABILITY

Means the ability to perform the promised service, dependability and accuracy.

TANIBLES

Means the appearance of physical facilities, equipment, personnel, and communication materials.

EMPATHY

Means caring, individualised attention which the Islamic bank provides for its customers.

RESPONSIVENESS

Means the willingness to help customers and provide prompt service.

Sorce: Othman and Owen (2001a)

According to Ahmad and Chapra (2000), Dusuki and Abdullah (2007), Hassan and Ahmed (2001) showed that Islamic banking are provide products and services which are most similar to those provided by conventional banks. Thus, studied in Bangladesh of Islamic banking products and services are can divided in two broad categories which is deposit mobilization (sources of funds) and financing facilities (uses of funds). The deposit mobilization offers by Islamic banking which is current account, saving account, and saving deposits. On the other hand, the financing instruments provided by Islamic banks are based on the Islamic Shariah which is Musharaka, Mudaraba, Bai-Murabaha, Bai-Salam, Bai-Muajjal, Ijarah, Hire Purchase under Shirkatul Meelk, and Qard (Ahmed, Rahman and Ahmed, 2006).

According to Dusuki and Abdullah (2007) found that the customers' awareness and usage played a vital role in examine customer behaviour. The judgment of customers' awareness and usage of products and services has become more important as today Islamic banks must not only belief on religious factors as a strategy to safe customers' loyalty but they should also accent providing quality and efficient product and services.

2.4 STAFF'S ATTITUDE

Kaynak and Harcar (2004) found that in a bank the managing service quality is very important because most are depends on how well the bank's staff respond to the needs and expectations of the customers. In the most of the cases, bank customers are evaluate the bank on the bank's staff dimension when they set a critical emphasis on the positive of staff's attitude, staff's knowledgeable, friendliness of the bank personnel, staff's professionalism and timely staff responses to customers. Besides that, Arasli, Katircioglu, and Mehtap- Smadi (2005) affirmed that customers are contact personnel played a significant role in the delivery of high quality service.

Awang (1997) stated that staff is an important asset in any organisation. Staffs are having respective ranks and responsibilities accordingly to the job that given to them. Besides that, an attitude also will reflect to how well on their performance. Overall, a positive attitude will attract the customers to using the products and services. The attitude of bank staff towards their customers is greatly important. Staff must understand the needed of their customers and use a simple language to help customers solve their problems. Thus, bank customers can feel friendlier with the bank's staff when in their interactions. Furthermore, a staff have change better attitude, the public will regard the bank as having change its attitude towards its customers and the public.

2.5 RATE OF RETURN

Khan, Hassan, and Shahid (2007) studied in bank selection criteria on Islamic bank customers, the result showed that the least important criterion is the rate of returns are provided by Islamic banks. In that study, they found that rate of return was the vital reason for preferring Islamic banks in Bahrain.

2.6 PROFESSIONAL ADVICE

Lorienc (2003) showed that the professional advice is important because most of the customers make a transaction were likely used the face-to-face interaction with the tellers or bank's staff. Their research's result found that 87 percent of customers were used to visit cashier, 83 percent were visit ATM, and 3 percent were uses internet banking. The suggested from researcher was the banks must have to keep their management staff highly trained and professional if the banks want to have best competition with their opponent. It's because they have to attract and satisfy their customer with direct interaction.

Awang (1997) found that the communication skills are the factor in presenting a professional image to customer. Most of the customers are more prefer to the professional skills like give clear suggestion or explanation, one who listens actively, observes accurately, and asks the right question. Failure to communication skills with customer certain matter or information required by them leads to losing clients.

2.7 CONVENIENCE

According to Kaufman (1967) studied of bank selection criteria in USA found that the convenient location to home or place of business is the most influential factor reported by households. Kaynak et al (1992) reported that the bank location played an important role for bank customers who are under age of 40 as compared to other age groups.

Almossawi (2001) found that most of the young customers appreciated on factors like availability of parking space nearby the banks. It because the customer can accomplish their transaction in short time of period and also can help them to save cost. The Automated Teller Machines (ATMs) are availability in several convenient location and provide 24-hours availability of ATM service also will affect the customers' bank selection. Bank customers can make a cash deposit or withdraw cash in a short time period and don't need to queue for a long time.

2.8 INTERNET BANKING

Sohail and Shaikh (2007) found that the "efficiency and security" is the main factors that will affect service quality of internet banking. Most of the customer will appreciate the efficiency in internet banking which is the speedy of downloading. The speedy of downloading involves the customers make a complete transaction in quickly. Security, which is ensure the bank customers in safety when they make a financial transaction. Bank customer will be afraid of the financial loss and risk of fraud, so they need a strong security to protect them. Therefore, this is the mainly factors when the bank customer selecting a bank.

Nath, Schrick, and Parzinger (2001) state that internet banking is allows customers to conducting a transactions online at anytime and anywhere like checking balances, funds transfers, bills payment, and etc. Thus, this also added convenience to the customers with the lowers transaction costs to the bank. It also a reason for the customer when they choosing a bank.

2.9 BANK'S REPUTATION

Haque, Osman, and Ismail (2009) state that bank's name and reputation are strongly affect customer selecting a bank. They investigate that reputation and image factor are demonstrated as one of the important criteria in the banking selection decision.

Almossawi (2001) investigate that bank's reputation'' was found to play a significant role as a selection criterion. Young people prefer to deal with popular, reputed banks. This implies that banks can attract young people by engaging in various public relations activities that would give good press and TV coverage for their activities, such as charitable contributions, and sponsorships of local events which will lead to boosting their image and reputation in the public eye. Such a strategy will enable the bank to create a positive image in the minds of young people. For today's young people, brand name is one of the major factors determining their decisions for obtaining goods and services.