Attitude of Customers towards the Services of Conventional and Islamic Banks in Bangladesh: A Comparative Study

Abstract

In modern world, due to the expansion of multidimensional economic facets, banking sector is facing some challenges such as earning expected profit, survival through severe competition, providing satisfaction to the customers, retaining the volume of the customers and so on. Bangladesh's banking sector is not an exception to the above challenges. In order to face the challenges, conventional and Islamic banks are trying to diversify their services for satisfying the needs of the customers. In fact, customers are the final orbiter and key phenomenon for attaining the ultimate goal of the banks. In the context of competitive banking, customer is the king in all respect of the banking business. Hence, perception and attitude of the customers towards the services of banks are much more important. The present study, therefore, aims at analyzing, examining and comparing the attitude and perception of the customers towards the services of conventional and Islamic banks. In doing so, customers' attitudes towards the choosing factors of a specific bank, different services and service related issues have been covered for the analysis. The selected service areas are: savings and deposit services, loan/investment services, ancillary and general services, e-banking services etc. Apart from those, service related various issues, transaction behavior of the bankers and time study have also been included under the study. In Bangladesh, no other in-depth study, except a bank customer survey on the scheduled banks conducted by Bangladesh Institute of Bank Management in first half of 1980s, is conducted as to examine and compare the attitude and perception of the customers towards the services of conventional and Islamic banks. However, for analyzing as well as comparing the perception and attitude of the customers, some indicators have been taken in case of each service and service related issues. This research, mainly, has been conducted on the basis of primary data though secondary data has also been used. In true sense, characteristically this is an in-depth, descriptive and empirical research; and concluding remarks have been drawn on the basis of results of different statistical tools. The researcher has purposively selected a total of six prominent conventional and Islamic banks of Bangladesh. In order to make the clear difference of perception and attitude of the customers, conventional banks have been divided into two groups such as conventional public and conventional private. For collecting data, 461 respondents were selected where depositors and borrowers were 255 and 206 respectively. To conduct the field survey, two sets of structured questionnaires were prepared following the Likert summated scaling method. The processing and analyzing of data have been made applying descriptive and inferential statistical tools such as mean, standard deviation (SD), co-efficient of variance (CV), analysis of variance (ANOVA), confirmatory factor analysis and chi-square test with the help of statistical packages for social science (SPSS) software 10.0 version. From the result of Confirmatory Factor Analysis, the key findings have shown that the depositors of CPBs choose the services of their banks with high priority for goodwill and well recognition; and satisfactory financial condition of the banks. On the other hand, borrowers of CPBs choose the services of their banks with high priority only for business purpose and satisfactory financial condition. The depositors of CPRBs choose the services of their banks for bankers' co-operative and polite behavior; and location of bank near workplace while the borrowers of CPRBs prefer the services of their banks for good relation with bankers and service quality of concerned banks. Further more, the choice criteria of services of IBs are affected by the depositors' tendency of avoiding interest, satisfactory financial condition and faith in Islamic values. But the borrowers of IBs choose the services of their banks only for business purpose as well as quality service of the banks. Under savings and deposit services, depositing and withdrawing money relating to different savings account, deposit pension scheme (DPS), mudaraba savings scheme (MSS) etc. have been included. From the result of ANOVA, different perceptions between the depositors of CPBs and CPRBs have been observed and depositors of CPBs and IBs face more difficulties in getting the services of depositing and withdrawing money over the counter than that of CPRBs. In this regard, inadequate speed of counter personnel of CPBs is more remarkable than those of CPRBs and IBs. Depositors of CBs (public and private) highly prefer the Deposit Pension Scheme of conventional banks for high security of deposited money. On the other hand, depositors of IBs are highly inspired in depositing money under Mudaraba Savings Scheme for avoiding the interest (in conventional sense). Under ancillary and general services, account opening service, issuing the checkbook, consumer credit scheme, exchange service of torn notes, counter delivery service, services of preparing the bank draft, DD etc.; entertainments and seating arrangement etc. In case of services of opening an account, significantly different perception of the depositors are found between the CPBs and CPRBs; and CPRBs and IBs at maximum level. Specially, lack of concerned banker's efficiency and delay processing are highly observed in CPBs than those of CPRBs and IBs and such lackings are highly found in IBs as compared to that of CPRBs. According to most of the depositors of CBs and IBs, the rate of interest/profit on the scheme of consumer credit is high and they opined that the number of monthly installment payable should be increased. Customers of CPRBs receive the exchanging service of torn notes and money delivery over the counter smoothly than those of CPBs and IBs. CPRBs render more smooth services in terms of preparing the bank draft, DD etc. than those of CPBs and IBs; and the quality of such service in IBs is higher than that of CPBs. It is observed from the perception of the customers that the bankers of CPRBs entertain their customers with smiling face, offering tea, welcoming to the managers' chamber as compared to those of CPBs and IBs. And such entertainments are mostly found at IBs as compared to that of CPBs. The level of satisfaction of the customers on different services has been tested by ANOVA. It has been observed that the customers of CPRBs are more satisfied with services of opening account, depositing money, encashment of general check and DD, depositing DPS and MSS monthly installment, knowing account balance, getting checkbook, preparing bank draft and DD, collecting domestic and outstation checks than those of CPBs and IBs. In this regard, comparatively high level of satisfaction is observed among the customers of IBs than that of CPBs with regard to above services. Regarding money counting process, most of the customers of CPBs express their attitude that money should be counted by hand. On the contrary, majority of customers of CPRBs think that money should be counted by counting machine. As the counter personnel, most of the customers of IBs opine that male bankers should be employed in delivering the counter service whereas, majority of customers of CPRBs agree with employing the male and female bankers in counter service. In addition, most of the customers of IBs express their attitude that separate counter pocket should be arranged for lady customers. In regard to the services of Internet and on-line banking, most of the customers express their attitude that banking services would be easier and more prompt through such type of banking though the service charge would be higher. Regarding the services of ATM, all of customers have agreed with the ATM's revolutionary contribution to ensuring 24-hours money withdrawal. In this regard, most of the customers face the unavailability of ATM boxes in their concerned areas. Sometimes, due to unavailability of money at ATM channel, customers of CPBs do not withdraw the required money as per their necessity. The customers' attitude towards the effects of computerization in banking is remarkable. A good number of customers opined that services have been rrompt and errorless. On the other hand, more or less equal number of customers comments that services have been errorless but not prompt. In case of services of sanctioning loan/investment at first time, ANOVA result shows the significant variations between the CPBs and CPRBs; CPBs and IBs at maximum level. The overall quality of services of CPRBs and IBs in sanctioning of loan/investment at first time is better than that of CPBs. In this regard, the service quality of CPRBs is superior to that of IBs. Only borrowers of CPRBs are satisfied with the procedural formalities and sanctioned time of loan/investment. The average level of satisfaction on quantity of investment/loan, repayment period and sanctioned time of the loan are found in attitude of the borrowers of three types of banks while such level of satisfaction in CPBs is lower than those of CPRBs and IBs. In case of documentation and sanctioned time of investment, borrowers of IBs are less satisfied than those of CPRBs and CPBs. It is remarkable that borrowers of three types of banks are strongly dissatisfied with the rate of interest/profit payable on loan/investment and borrowers of IBs are more dissatisfied than those of CPRBs and IBs in this regard. In fact, loan/investment advisory services delivered by the branch manager/banker are one kind of additional important service, which can help the borrowers in proper utilization of sanctioned fund. It has been observed that the quality of advisory services of CPRBs and IBs is higher than that of CPBs and in this regard, bankers of IBs show more efficiency in delivering advisory services than that of CPRBs. Hence, ANOVA test shows the significant ciifferences between the services of CPRBs and IBs. Banks deliver various services under the dealings of Letter of Credit (L/C) on behalf of their borrowers. However, the overall performance of L/C service of IBs is better than those of CPRBs and CPBs. In this regard, bribe-taking culture is more or less observed in CPBs and CPRBs than that of IBs. Regarding renewal services of loan/investment, delaying is observed in the CPBs while such tendency is not largely found in CPRBs and IBs. Usually, banks deliver the supervision service whether the loan/investment fund is being properly utilized or not under their rules and regulations. It has been observed that the supervision service in terms of loan of CPRBs is better than those of IBs and CPBs. In this respect, average supervision is largely observed in CPBs. In order to ensure the smooth services of sanctioning of loan/investment, the influences in various ways have to be applied for affecting the bankers. In case of practices of financial tips or taking of bribe, most of the borrowers of CPBs and a number of borrowers of CPRBs express that such tip is paid to the concerned bankers or branch manager but all the respondents do not express their complaints in questionnaires. Because, their afraid is that bankers may not renew the sanctioned loan in further. It is observed that a good number of horrowers of CPBs and a small number of borrowers of CPRBs have to pay a percentage of the loan or a certain amount of money to the bankers to get the loan. Moreover, in the services of sanctioning of loan/investment, influences of political elites, branch's officials, bank's high officials etc. are also more or less observed in CPBs, CPRBs and IBs. GPnerally, borrowers expect to get required loan/investment and other required services through easy and prompt processing. But some complaints are observed among the borrowers that create the barriers in sanctioning and disbursing loan smoothly. Most of the borrowers of three types of banks comment that at least one excess document is submitted to the respective banks for taking loan/investment. Moreover, the delay in taking decision and delay in processing of loan/investment documents are more or less found in CPBs. But such delaying is not largely found in CPRBs and IBs. In case of sanctioning the adequate loan/investment, limited power of branch manager is one of the barriers in CPBs, CPRBs and IBs. At the time of rendering service, sometimes, customers are requested to transfer the documents, checks, and ledgers etc. from one desk to anther. In this regard, customers of CPBs face this situation more than those of CPRBs and IBs. Bankers deliver, during banking hours, various services to the customers in accordance with the necessity. Such service interaction between the banker and borrower are obviously related to the behavior of bankers. However, bankers of : CPRBs communicate in more time with their customers in smiling faces than those of CPBs and IBs and communicating with smiling face by the bankers is comparatively observed in IBs than that of CPBs. It has been found that sometimes, customers do not understand about any service and they expect thoughtful understanding from their bankers. In all respect of understanding manners, the etiquette of CPRBs is better than those of IBs and CPBs; and the etiquette of IBs is comparatively better than that of CPBs. It is a normal expectation of IB customers that the behavior of IB bankers would be enlightened by the Islamic principles. But in reality, religious values are not much reflected in the behavior of 1B bankers. In regard to interest free service of IBs, attitude of most of the customers is that Islamic banks are trying their best to render interest free banking service in Bangladesh. And a small number of customers believe that IBs are rendering fully interest free service in the present interest-oriented financial environment. Under the time service, selected services such as opening an account, encashment of general check over the counter, encashment of DD, depositing money over the counter, depositing DPS/MSS installment; preparing pay order, bank draft etc.; sending TT, providing information about account balance, collection of local and outstation checks etc. have been analyzed on the basis of time actually taken and the time the customers expected. However, it is observed that the practical time taken by the bankers is higher than that of expected time · estimated by the customers. In all respect, time service of CPRBs is better than those of CPBs and !Bs and the quality of such time service in IBs is higher than that of CPRBs. In this regard, it is observed that the CPBs bankers do not show the necessary readiness in rendering the services and they are, sometimes, involved with other task at the time of rendering the counter related services. To overcome the problems identified by the customers' perception and attitude in case of services in both CBs and IBs, the study has offered a set of suggestions in the concluding chapter. A short profile of those is presented here for a quick review. Since the service quality and the bankers' behavior of CPBs and IBs are not up to the mark considered by the perception of the customers, the researcher, therefore, would like to suggest the respective banks to arrange the effective workshops by participating the bankers that may be helpful to improve the issues as much as possible. In order to upgrade the service quality of depositing and withdrawing money over the counter, CPBs and CPRBs should apply the necessary measures for improving the efficiency of cash officer. In this regard, IBs should provide the adequate space in front of counter for easy receiving the counter services. Also, CPBs should provide the adequate money count machine for rendering the prompt services of depositing and withdrawing money over the counter. For rendering the smooth services of opening an account, CPBs, CPRBs and IBs should arrange the separate desk. Also, CPBs should take necessary steps to render the prompt and timely services relating to opening account. The customers of CPBs, CPRBs and IBs express their attitude that the rate of interest/profit payable on consumer credit scheme is high. So, the top authority of concerned banks may consider the matter. Besides, CPBs should sanction such scheme loan without delay harassment and bribe. The cash officers of CPBs and ms should be attentive and smiling in delivering money to their customers over the counter. Regarding the services of preparing the bank draft, DD etc., the researcher would like to suggest the bankers of CPBs to render the service of such drafts without unnecessary delay. In case of different services like opening account, depositing money, Depositing DPS/MSS installment, encashment of general check, getting check book, withdrawing money by DD, knowing cash balance, preparation of DD/bank draft, collection of checks etc. the bankers of CPBs should try to increase the level of satisfaction of their general customers by applying necessary measures as far as possible. In this regard, CPBs should appoint the efficient service advisors in busy branches who would monitor the customer services at all level. In fact, bankers do not have to pay for smiling talks with the customers. Therefore, to upgrade the quality of service and provide the better relationship with customers, bankers of CPBs and IBs should entertain their general customers with smiling face. For providing the easy withdrawing of money at 24-hours, CPBs, CPRBs and IBs banks should take necessary steps in providing the sufficient ATM facility in gap area with considering the necessity. In order to make the waiting comfortable in the branch, CPBs should provide adequate seating arrangement. When the borrowers of CPBs and IBs come to their banks, they do not get proper importance from their bankers/branch manager. So, the bankers of CPBs and IBs should give proper importance to their newcomer borrowers. According to most of the borrowers of CPBs and a number of borrowers of CPRBs, bankers of respective banks expect and take bribe for mortgage valuation as well as sanctioning of loan. So, the researcher would like to suggest the top authorities of concerned banks to take necessary steps for rendering the services of sanctioning of loan smoothly by removing the bribe culture as well as unnecessary delays. In this regard, necessary legal supports should be designed by the respc.,nsible bodies of government for punishing the corrupt bankers and even Bangladesh Bank should take necessary steps for monitoring the loan sanctioning service as well as corruption of the bankers. Further, political leaders are found to influence the branch manager for sanctioning of loan. Therefore, CPBs and IBs should tactfully avoid such influences and if needed, branch manager may take legal support in this regard. Usually, the borrowers of CPBs are not satisfied with the service procedures of sanctioning of loan. So, CPBs should take necessary steps to make the easy service procedures in case of sanctioning of loan in accordance with the rules and regulations of the bank. In this respect, CPBs, CPRBs and IBs should avoid the requirement of excess documents in the procedure of sanctioning of loan. The borrowers of CPBs are less satisfied with the processing of loan proposal than that of CPRBs. Hence, CPBs should reduce the time in sanctioning of loan in this regard. Apart from this, CPBs and IBs bankers should enhance the capacity of decision-making as well as preparation of loan documents for proper loan sanctioning to the right borrowers. The top authority of CPBs should investigate the cause of delay service they should take necessary steps for removing the reasons of delay. In order to renew the granted loan/investment, CPBs, CPRBs and IBs should take necessary steps to stop the delay service in processing of renewal of loan. In case of supervision service of loan/investment, CPBs should ensure the proper supervision service as per rules and regulations of the bank. In order to remove the bribe taking culture and excessive delays, respective bank should form an efficient 'Loan Monitoring Committee' who would provide proper supervision as accordance with the guideline of Central Bank. Besides, to reduce the cielay problems, desk wise time limit should be fixed and honest and efficient bankers can be placed at the proper desks. In all respect, most of the bankers of CPBs and selected bankers of CPRBs and IBs should provide adequate training facilities in delivering all kind of services in terms of sanctioning, disbursing, utilizing and supervising of loan/investment. However, recommendations have been made with the thrust that top authority of banks, planners, policy makers and top level management of the respective banks of Bangladesh will be benefited to design the customer service efficiently, which will satisfy the customers and increase the profitability of the banks. Finally, the key finding of the study is remarkable. According to descriptive statistics, the entire service quality and service related issues of conventional private banks are better than those of conventional public and Islamic banks; and the service quality of Islamic banks is higher than that of conventional public banks. The differences between CPBs and CPRBs; and CPBs and IBs are found statistically significant as tested by empirical statistics. Another important finding is that the overall service quality of conventional private banks is better than that of Islamic banks as accordance with the results of descriptive statistics. But such differences are not statistically significant as tested by ANOVA in most cases.