A Theoretical Comparison of Interest-Free Banking and Interest-Based Banking: A Context of Pakistani Banking Industry

Abstract

The study was to present a comparative analysis of Islamic and conventional banking system of Pakistan. The study examines the relationship between service quality, customer satisfaction and performance of banks. This study examined the problems faced by the banking industry after the introduction of Islamic banking in Pakistan. The banking industry consists of Islamic and conventional banking systems. This research proposed a model of banking system in Pakistani environment. A structured questionnaire was created with the aid of pre-existing literature. Selected content from annual reports and interview data were analyzed. The population was based on administrative affairs officers at State Bank of Pakistan. 150 people were selected through purposive sampling. Data was collected by self-administered method using artificial sampling. Various study tools like SPSS etc. were used for content analysis. A set of regression analysis was used. The study used correlation and structural equation to test the hypotheses. The results indicate a positive and strong association among the quality of Pakistan's banking system and customer satisfaction. The results showed that the service superiority is not satisfactory and the customers are also not satisfied with the performance of the bank.