Abstract

The UK has a strong Muslim presence, with 3 million permanently residing in the UK, accounting for half of all ethnic minorities (Matthews, Tlemsani and Siddiqui (2003). Muslims are excellent prospects for banking and financial products with estimated savings of £1 billion and approximately 25% have annual incomes of over £30,000 (Matthews, Tlemsani and Siddiqui (2003). Islamic banks began operating in the UK in the 1980s. Now non Islamic financial institutions (e.g. HSBC, Lloyds TSB, Bromich Building Society) are also offering banking products that comply with Shariah law. The UK is home to the first wholly Shariah compliant retail bank in the west, the Islamic Bank of Britain, which was authorized by the FSA in 2004 (FSA, 2006). In addition, London has become an important financial centre with major international firms and the middle east’s biggest banks offering Islamic products. But are these banks meeting the service quality needs of their customers? Previous studies on service quality within Islamic banks have been restricted to Muslim based countries (e.g. Malaysian, Kuwait, UAE and Jordan). Whilst UK Muslims will have the same religious beliefs as Muslim’s worldwide, their cultural values are likely to have been affected by the western society in which they live and work. This paper develops a modified SERVQUAL for measuring service quality in UK Islamic banks.