Islamic and Conventional Banking: Analysis of Patronage Behavior and Perceptions of Pakistani Customers

Abstract

A fresh wave emerged in the Islamic Banking and Financial industry of Pakistan since the year 2003 when the private sector took the pioneering initiative. At present, six full-fledged and twelve conventional banks are offering Islamic banking services through 367 branches, having 4.3 percent assets share of the whole banking and financial industry. Present study makes a comparative analysis Of the behaviors of 600 customers of both Islamic and conventional banks. Key findings of the study shows: (1) Islamic banks are popular in relatively young, well educated and affluent class of the society. On the other hand, conventional banks are popular in relatively old, government employees and low income groups of the society, (2) Although, "religious principle" is the key element for bank selection strategy for many customers, however the performance of Islamic banks is also outstanding which attracts new Religio-liberal depositors too, (3) Majority of conventional banking customer use these banks for banking services, facilities or utility purposes, while Islamic banking customers use these banks mainly for investment and financing purposes, (4) Still many Islamic banking customers are
t Visiting Project Researcher and JSPS Post-doctoral Fellow, Centre for Islamic World Studies, Graduate School of Asian & African Area Studies, Kyoto University, Japaa' 1 not well aware about basic islamic banking concepts ; there is immense need of launching the 'Islamic banking awareness programmes' for these customres. And finally islamic banking customer were found at a higher satisfaction level as compared to conventional banks.