AN ECONOMIC ANALYSIS OF FACTORS AFFECTING CUSTOMER SWITCHING BEHAVIOR IN ISLAMIC BANKS: (A CASE STUDY OF PAKISTAN)

Abstract

The Switching behavior of the customers in banking sector increases day by day in Pakistan. The main objective of the study was to investigate the different factors that affect the switching behavior of the customers in the study area. The sample size of the study was 1% of the total banks which were 260 sample respondents. Convenience sampling was also used for data collection. The binary logistic regression model was used for analysis. The results of the study concluded that the customers switch to Islamic banks when charged high fees, with a significant effect on pricing. Sharia compliance also influenced switching behavior, while technology level also affected it. Moreover, the findings indicate that there was a positive and statistically significant effect of pricing on switching behavior. Sharia compliance significantly affects switching behavior but has a negative relationship with it. The level of technology negatively affects switching behavior but has an insignificant effect on it. Switching cost also has a negative and statistically significant effect on switching behavior. Staff attitude and knowledge have a significant effect but have a negative relationship with switching behavior. The research findings recommended that Islamic bank managers must make sure that all bank operations and products adhere to Sharia rules in order to preserve their competitive advantage in the market. They shouldn't give up this competitive advantage to expand their product line or speed up their business. Therefore, it is suggested that every Islamic bank have a separate Sharia committee that examines and certifies all bank procedures and products before making them available to clients.