Success Factors of Islamic Banks: An Empirical StudyAlthough Islamic banks do not distribute returns to current account
holders, this increases not only the rate of profit, but also multiplier of
assets/equity rate which is reflected in the form of even a greater increase in
the rate of profit. On the other hand, off-balance sheet deposits are
considered an attractive way of increasing the number of clients as well as a
very important vehicle to increase the rate of shareholders’ returns, because it
increases the earnings from the agency activities. Moreover, these earnings are
less affected by investment risks to which other banking earnings are
subjected.
2.1.2 Improving the Quality of Services to Clients
Some Islamic banks may pay little attention to the quality of services they
offer to their clients especially if such banks enjoy a position where they can
exercise some monopolistic power in the market. Many Islamic banks were
once in this situation when they were acting alone in their Islamic financial
services’ markets. Today, however, the monopolistic position is weakening
because of the multiplicity of Islamic banks in many countries and the entry
of conventional banks into the Islamic finance markets.
The experience of American banks in the 70s and 80s, when there was
fierce competition among them, has taught an important lesson. That is,
improved services to customers save cost in the long-term despite the short
term cost of higher spending on training and rehabilitation.^3 The improved
services create a climate which is conducive both for the clients and
employees. It increases clients’ enthusiasm for dealing with the bank on one
hand and raises the productivity of the employees on the other. This
improves the cost effectiveness of each dollar spent on labour.
It may be noted that improving the quality of banking services does not
only mean receiving and responding to clients’ requests. It also means the
ability of the bank to discover a client and to offer him/her a service
previously not used. This is a kind of commercial marketing of financial
services in full sense of the word as it is familiar in goods and services
marketing.
The efforts expended by the bank in improving the quality of clients
services depend on the clarity of its vision about the market segment to
which it is directing its services. Are the clients big financiers, businessmen or
monthly salary earners, middle-level traders and industrialists? Every segment
of clients has its own peculiarities. Experience has proven that banks that are
able to offer specialized services commensurable with the peculiarities and
objectives of every segment can attract the largest amount of deposits.^4