Service Quality and the Moderating Effect of Shari’ah Perception on Client Satisfaction; A Comparison of Islamic and Conventional Microcredit in Pakistan

Abstract

Microcredit is emerging concept which is precisely working well to reduce poverty as well as improving socioeconomic status after accessing microcredit by clients. Shari’ah perception as mindset and envision, is playing moderating role between the service quality and client satisfaction for clients of Islamic and conventional microcredit. The sample clients are 578. 289 clients from each sub-sector of microfinance provider .i.e. Islamic microfinance institutions and conventional microfinance institutions. Akhuwat and Kashf are taken for Islamic microfinance institutions while Rural Community Development Society and Development Action for Mobilization and Emancipation are taken for conventional microfinance institutions, representing the microcredit of microfinance sector in Pakistan. The comparison is done between Islamic and conventional microcredits from Islamic and conventional microfinance institutions. The correlation, regression, ANOVA and interaction test is used for testing the relationship of Shari’ah perception as moderator among service quality and client satisfaction. The findings show the significant positive association between service quality, Shari’ah perception and client satisfaction for both Islamic and conventional microfinance institutions while there is significant moderating effect of Shari’ah perception between service quality and client satisfaction for both clients of Islamic and conventional microcredit. The result also shows that the determinants are highly significant. On the basis of interest perception, Islamic microfinance institution can capture more clients from conventional microfinance institutions because their clients don’t consider interest good for wellbeing or else, conventional microfinance institutions should open window for Islamic microcredit to compete in market.