1. Introduction

Islamic banks in the GCC have been expanding at double digit annual growth rates over the past decade. In the past five years alone, more than 50 Islamic financial institutions have been launched and many conventional banks have been converted to Islamic banks in a bid to tap into the rising demand for Shari’ah compliant products and services (The Banker, 2009). However, the idea of Islamic banking is relatively new and people are inclined to deal with highly experienced banks that offer exceptional quality of service to their customers compared to the new entrants. In the present scenario of retail banking in Kuwait, where banks are becoming larger, along with the closure of branches and the advent of internet banking, the question whether the retail customers (Islamic or conventional) are satisfied or not with the financial and banking services offered by their banks is vital, especially when the level of customer satisfaction is highly correlated with the range, diversity and quality of services offered by their bank.

It should be noted that Islamic banks offer the same range of financial products and services as any conventional bank would offer, but they are not adopting the same type of principles and integrity as conventional banks as they are based on the Islamic perspective and hence not offering the same quality of service. However, the present competitive trends in the banking sector make the development of Islamic banks increasingly challenging, which makes customer service a high priority. Thus, it is very important for Kuwaiti players in the Islamic banking industry to better position themself in order to confront and respond vigorously to the robustness of the local financial environment. This makes service quality and customer satisfaction a superior strategic choice for competing in the Kuwaiti financial market.

Competing through quality and satisfaction will help in maintaining their customer base and attracting new clients. Especially with the increase in customer awareness and the tremendous choices available to select a certain financial institution or bank over another, plus the deregulation of the financial service industry that granted the foreign banks presence in the local market have all contributed to increased recognition that service quality is centrally an important determinant shaping customer satisfaction.