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Meanwhile, Bank Islam Malaysia reported that some 70-80 percent of the bank’s trade and
corporate financing are with non-Muslim clients (Ngui, 2004). Deloitte Touche Tohmatsu Malaysia
reported that 70 percent of Islamic banks financing in Malaysia was contributed by non-Muslim
customers (Saifuddin, 2003). Previous study has shown that both Muslim and non-Muslim customers
have a good understanding of products and services offered by Islamic banks in Malaysia (Amin and Isa,
2008), and that Islamic banks in Malaysia are accepted by both customer groups. Thus, Islamic banking
is not merely of interest to Muslim customers but clearly non-Muslims customers see benefits from such
a system.
Just like other service industries, most of studies consider delivering quality services as an essential
strategy for success and survival for any including Islamic banking institutions. That is why Islamic
banks put more in the effort to position their salient features in line with customer needs, which requires
them to monitor customer preferences for their investments and borrowing options closely so as to design
appropriate business strategies (Chong and Liu, 2006). In order to compete, Islamic banks probably need
to develop effective marketing strategies, upgrade their technological capabilities and develop their
human resources. In particular, there is a need for Islamic banks to develop and maintain better service
quality and customer satisfaction. The remainder of this paper proceeds with next section presenting a
detailed literature review. The second part of the study discusses the methodology of the study in detail,
with third section of the paper outlining results and discussions and the final section drawing conclusion
of this study.

Literature review
Service Quality
Service is kind of performance that is offered by one party to another and in corporeality is a must part of
it (Kotler & Keller, 2006). Services are defined by some characteristics like services are incorporeal in
nature; we cannot measure the service by some instrument. Services are said to be inseparable that is
production and consumption usually takes place at the same time. Moreover, services are variable in
nature; they don’t follow a same or some kind of linear pattern. Gronroos (2000) defined service as, “A
service is a process consisting of a series of more or less intangible activities that normally, but not
necessarily always, take place in interactions between the customer and service employees and/or
physical resources or goods and/ or systems of service provider, which are provided as solutions to
customer problems”. Very often polymorphism is also seen in services as services are simple as well as
complex. (Ograjenˇsek, 2008).
Quality consists of two primary elements which are first, either a product satisfies the needs or
second, up to which level it is free from deficiencies (Juran, 1988). Quality spells superiority or
excellence (Taylor and Baker, 1994) (Zeithaml, 1988), or, as the consumer’s overall impression of the
relative inferiority or superiority of the organization and its services (Bitner and Hubbert, 1994;
Keiningham et al., 1994-1995).
Service quality is defined as the outcomes of the customer’s overall evaluation of the differences
between service expectations and the actual service performance (Othman, A. & Owen, L. 2002). To
some, service quality can also be defined as the difference between customer’s expectations for the
service encounter and the perceptions of the service received. Fogli (2006) defined term service quality
as “a global judgment or attitude relating to particular service; the customer’s overall impression of the
relative inferiority or superiority of the organization and its services”. According to the service quality
theory (Oliver, 1980), it is predicted that customers will judge that quality as ‘low’ if performance does
not meet their expectations and quality as `high` when performance exceeds expectations. Therefore,
service quality is conceptualized as a multidimensional construct consisting of five dimensions (Othman,
A. & Owen, L. 2002).
A quantitative research was arranged by Parasuraman et al in 1988 in which an instrument was
developed for measuring the perception of consumers regarding service quality and after that research it
became known as SERVQUAL. The dimensions of SERVQUAL model were:
(1) Tangibles: the physical surroundings represented by objects (for example, interior design) and
subjects (for example, the appearance of employees). (2) Reliability: the service provider’s ability to
provide accurate and dependable services. (3) Responsiveness: a firm’s willingness to assist its customers
by providing fast and efficient service performances. (4) Assurance: diverse features that provide
confidence to customers (such as the firm’s specific service knowledge, polite and trustworthy behavior