Islamic Banking Service Quality and Withdrawal Risk: The Indonesian Experience

International Journal of Excellence in Islamic Banking and Finance, Vol. 1, No. 2, pp. 1-15, 2011

15 Pages Posted: 28 Feb 2012

See all articles by Muhamad Abduh

Muhamad Abduh

International Islamic University of Malaysia (IIUM)

Date Written: February 28, 2012

Abstract

This paper aims first to evaluate the service quality of Islamic banking and second to explore the withdrawal behavior of Islamic banking depositors based on their evaluation towards its service quality in the context of Indonesia. A total of 276 Islamic banking customers in Jakarta, Indonesia, were involved through a direct survey. Factor analysis was carried out to uncover the key dimensions of Indonesian Islamic banking service quality. Next, we use central tendency measurement to extract the information of depositors’ withdrawal behavior towards those dimensions. Afterwards, the importance and performance analysis (IPA) was employed to evaluate the level of Indonesian Islamic banking service quality. The exploratory factor analysis uncovered five key dimensions of Indonesian Islamic banking service quality, including reliability, bank-customer relationship, tangibles, Shari`ah issues, and rates and charges. Shari`ah and tangible are the first and second most influence factors for depositors to withdraw their funds from Islamic bank. However, despite their high level of importance, Shari`ah and tangible were always perceived poor in performance while others were largely modest. Within this kind of situation, withdrawal risk is, therefore, should be the most potential risk to be anticipated.

Keywords: service quality, withdrawal risk, Islamic banking, Indonesia

JEL Classification: M31, G21

Suggested Citation

Abduh, Muhamad, Islamic Banking Service Quality and Withdrawal Risk: The Indonesian Experience (February 28, 2012). International Journal of Excellence in Islamic Banking and Finance, Vol. 1, No. 2, pp. 1-15, 2011, Available at SSRN: https://ssrn.com/abstract=2012420

Muhamad Abduh (Contact Author)

International Islamic University of Malaysia (IIUM) ( email )

Jalan Gombak
Kuala Lumpur, 53100
Malaysia

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