1.1 Background to the Study
Marketers are often faced with the challenge of examining their service quality from customers’ point of view. To achieve this, they use market research to determine customers’ expectations and then use information obtained there to develop their service quality dimension in order to meet or exceed their customers’ expectations. Many service organizations in Nigeria have responded to the strategic and financial impact of quality by treating it as a valuable tool for building and maintaining competitive advantage. Companies that have goods and services perceived as being of high quality typically experience high customer patronage and loyalty; such that satisfied customers often help to attract new customers through word of mouth advertising and positive referrals. Thus, it is apparent that, in the long term, the most important factor affecting business performance is the quality of goods and services offered by the organization, relative to its competitors. Many companies therefore, try to deliver a service with superior and differentiated quality.
For a while now, Islamic banking has emerged as one of the fastest growing industries. It has spread to all corners of the globe and received wide acceptance by both Muslims and non-Muslims alike being one of the most important players in financial service industry, Islamic banking is now seen as a business entity striving not only to fulfil the religious obligations of the Muslim community, but also, as a business that is needed for winning over other customers whilst retaining the old ones. Islamic banking has become an integral part of global banking and finance industry. Since its debut in the 1960s as an alternative to the interest-based banking, Islamic banking has continued to grow and expand in both the number of institutions, assets size and countries in which its products and services are offered. As Hasan & Dridi (2010) stated, its remarkable progress over the last four decades as well as its astounding resilience, especially during the global financial crisis of 2007 through to 2009, have further left admirers as well as acclaimed financial experts to consider it a veritable and competitive mode of financial intermediation that cannot be simply ignored by the global financial system.
As a system of financial intermediation that absolutely prohibits receipt or payment of interest and/or usury in all financial dealings, Islamic banking promotes risk-sharing, encourages entrepreneurship, insists on Shari’ah (Islamic law) compliance of contracts, and promotes moral and ethical values as well as sound corporate governance. The system has gained recognition and attracted a lot of support from international monetary organisations such as the World Bank and International Monetary Fund (IMF). Hassan and Dridi (2010) in a world bank commissioned study, adjudged it to be the fastest growing segments of the international financial services industry in 2008. By the same period, most of the leading international banks that include Standard Chartered, Citibank, HSBC, Bank of America, Barclays, Deutche Bank and Royal Bank of Canada had already opened Islamic banking windows or subsidiaries in different parts of the world (Greuning & Iqbal, 2008). By the end of 2012, the amount of assets held by Muslim investors worldwide was estimated at $2.7 trillion with an annual growth rate of 12% to 15% over the past ten years. As at 2014, there are over 400 full-fledged and 190 windows of Islamic banking and non-bank financial institutions operating in about 75 countries (Islamic Finance News, 2014) that include Muslim countries such as Bahrain, Sudan, Egypt, United Arab Emirate, Saudi Arabia, Malaysia, Brunei and Pakistan, and non-Muslim countries such as United States of America, United Kingdom, Canada, Switzerland, South Africa and Australia (Hasan & Dridi, 2010). This study seeks to examine the factors that motivate customers to deal with an Islamic bank as well as measuring customers’ perception of the effectiveness of service quality dimensions as provided by Jaiz bank in Kano State, Nigeria.
1.2 Statement of the Problem
Available literatures have revealed that customers’ product knowledge has differing degrees of influence on product evaluation (Rao & Monroe, 1988), brand evaluation (Muthukrishnan & Weitz, 1991), attitude formation (Chang, 2004), and information search behavior (Gursoy & McCleary, 2004). It is guided and governed by far reaching value systems which encompass central dispositions applicable to a wide range of situations, context and behavior (Maiyaki & Ayuba, 2015). Generally, the knowledge which a person has about a product or service shapes his patronage behaviour of the firm that offers the product or provides the service.
There are various studies on Islamic banking that covered a wide range of issues including those on Islamic bank patronage factors. The studies, which are mostly foreign-based, have documented mixed findings. For instance, one of the earliest and most commonly cited works in the Islamic banking literature pertaining to customer patronage is that of Erol and El-Bdour (1989). The study established that the most important criteria considered by customers in patronizing Islamic banks are provision of fast and efficient service (service quality}, bank’s reputation and image, and confidentiality. Metawa and Al-Mossawi (1998) on their part found in Bahrain that religion is the most important bank product patronage factor.
In Nigeria, the bulk of studies conducted on Islamic banking products are exploratory in nature in view of the fact that Islamic banking operation is still new. However, few empirical studies exist mainly on factors that affect customers‟ decision to select a bank. Hussain (2010) examines the behaviour of Small and Medium Scale enterprises (SMEs) toward profit and loss sharing (PLS) financing in Kano metropolis. The study found that SMEs in Kano state consider interest rate as the main determinant of choosing where to seek finance. It is noteworthy that the study did not incorporate product knowledge in its various constructs.
A common gap in all the aforementioned studies is that they inadvertently ignored the aspect of customers’ knowledge of Islamic banking products as measured by experience, value, contextual information and expert insight dimensions, and how these dimensions relate to patronage. This is despite the evidence in the literature, of the association that exists between these four dimensions of customers‟ product knowledge and customer patronage. In view of the fact that understanding the journey thus far, requires an empirical examination of how the constructs of product knowledge have influence on customers’ bank products patronage. This study seeks to fill the above mentioned gap that exists in the literature.
1.3 Research Objectives
The general objective or main objective of this study is to examine the perception of customers on Islamic banking in Nigeria by using Jaiz bank as a case study. The specific objectives are:
i) To investigate the perception of people towards Islamic banking in Nigeria
ii) To examine the effect of customers’ level of education on their patronage of Jaiz bank products in northern Nigeria
iii) To identify the effect of customers‟ experience on patronage of Jaiz bank products in northern Nigeria.
1.4 Research Questions
The following are some of the questions which this study intends to answer:
i) What is the perception of people towards Islamic banking in Nigeria?
ii) What are the effects of customers’ level of education on their patronage of Jaiz bank products in northern Nigeria?
iii) What are the effects of customers‟ experience on patronage of Jaiz bank products in northern Nigeria?
1.5 Significance of the Study
The study is expected to add to the existing body of knowledge in Islamic banking by determining the relationship between customers‟ knowledge of products and their patronage of the bank’s products. The research work is also expected to make contribution to present body of knowledge in Islamic banking by examining the linkages between the levels of experience, values, contextual information and expert insight of customers to their decision to patronize Islamic banking products and services. Most of the previous studies investigated independently on the dimensions of customer knowledge. But this study would add to the existing studies on knowledge of Islamic banking products by studying in depth the combined effect of experience, values, contextual information and expert insight of Islamic banking products and services by Jaiz bank customers on their decision to patronize Islamic banking products. The study would provide the much-desired information to prospective customers, investors and future promoters and regulators of Islamic banking services in Nigeria. In addition, policy makers, religious organizations, and academics can make use of the result of the study to create awareness and sensitize the general public on the benefits/opportunities of Islamic banking services in Nigeria.
1.7 Scope of the Study
This study is designed to examine the perception of customers on Islamic banking in Nigeria by using Jaiz bank as a case study. The study aims at finding whether variable like; perception, products and services have effect on Islamic banking in Nigeria.
1.7 Limitation of the Study
The Major Limitations of the study are:
Cost Limitation: There was a cost limitation. This means that we could not offer any gift or monetary incentives for the respondents to answer the questionnaire. This might have resulted in certain prospective respondents choosing not to respond to the questionnaire. This might not have created a motivation among respondents not to take a chance to give opinions. Time Limitation: There are two types of time limitation faced during the study. The study was done for a period of four weeks. Hence the results would reflect the impact of the time constraint. The insights of the respondents were observed during the period of study. A more extensive study conducted over a larger time period or during a special period of time like when there were higher numbers of issues, can include insights from employees over a broader time period and can bring in further depth into the research.