Abstract

Ashfaq Ahmad*, Kashif-ur-Rehman and Nadeem Safwan

This study analyzes the services quality of products offered by Islamic banks with mediating effect of customer satisfaction on bank performance. There is an increasing competition among banks to capture new customers as well as to retain existing customers. It requires a study to measure the impact of service quality on customer satisfaction towards bank performance. Data were collected from 720 respondents of 60 branches of six full fledged Islamic banks operating in Pakistan by simple random sampling. The researcher used PLS based SEM to assess the magnitude of the relationship among service quality, customer satisfaction and performance of Islamic banks. The results indicate a strong positive relationship between service quality and customer satisfaction, while weak positive correlation exists between service quality and bank performance, but negative relationship was found between customer satisfaction and performance of Islamic banks in Pakistan. Furthermore, it is found that customer satisfaction does not mediate between service quality and bank performance. The gap between customer satisfaction and bank performance may be due to bankers’ concentration on network expansion instead of customer orientation and customer focus. This study enables the bankers, policy makers and researchers to identify the factors that could result a discrepancy between satisfaction and performance of banks.