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The first Islamic bank in Malaysia was established in 1983. Currently, there are 12 full-fledged
Islamic banks and eight dual-window banks operating in Malaysia alongside the local full-fledged
Islamic banks, local and foreign dual-window banks (Bank Negara Malaysia, 2010). In Malaysia,
conventional banks are allowed to offer Islamic banking products and services under the dual-window
concept. In implementing a dual-window banking system, the Islamic banking system operates in parallel
with the conventional banking system (Bank Negara Malaysia, 2007). A dual-window bank is a bank
with two windows under the same roof, one for conventional banking operations and the other for Islamic
banking. Although there is a difference between Islamic banks and conventional banks, there are some
similarities between the two in terms of offering complementary products and services (El-Din and
Abdullah, 2007). For example, Islamic banks offer facilities, such as saving accounts, current accounts,
credit cards, and other products and services (Naser, 1999).

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.

2. 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).

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