Study of Customer Satisfaction in the Banking Sector in Libya

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 Abstract—The purpose of this paper is to evaluate the
customer satisfaction of the banks sector in Libya, based on
customer perception regarding service quality. This is an
empirical study using mainly primary data collected through a
well-structured questionnaire. The questionnaire has been
personally administered on a sample size of 150 bank customers.
This paper makes a useful contribution as there are only a few
studies dealing with the assessment of service quality in banking
sector of Libya. The findings based on three different
independent variables (service quality, customer loyalty and
security) showed that all these variables influenced consumers
satisfaction in Libyan banking sector. There is a positive and
significant relationship between the customer satisfaction and
two variables (service quality and customer loyalty), and there
is negative and significant relationship between security and
customer satisfaction.
Index Terms—About customer satisfaction, customer loyalty,
libyan banking sector, security, service quality.
I. INTRODUCTION
The issue of service quality is a critical one throughout
service industries as businesses attempt to sustain their
competitive advantage in the marketplace. Owing to the
financial services like banks‟ competition in the marketplace
through undifferentiated products, this highlights service
quality as the basic competitive tool (Stafford, 1996) [1]. In
other words, a banking organization may attract customers
through the provision of high quality services. As such,
structural modifications have led to banks being enabled to
carry out various activities which in turn, allow them to be
more competitive even against non-banking financial
institutions (Angur et al., 1999) [2].
In addition, technological advancements are helping banks
develop their service strategies being offered to individual as
well as commercial customers. Moreover, banks offering
quality services own a distinctive marketing edge because
enhanced quality service is associated with higher revenue,
customer retention and higher cross-sell ratios (Bennett &
Higgins, 1993) [3]. Banks are also well aware of the fact that
customer‟s loyalty lies in the banks‟ production of greater
value compared to their competitors (Dawes &Swailes, 1999)
[4].
Libya is a country extending over an area of 1,759,540
square kilometers and is ranked 17th nation in the world
according to size. In the context of land area, Libya is smaller
compared to Indonesia and approximately akin to the size of
Alaska, U.S. To the north, it is bound by the Mediterranean
Sea, to the west by Tunis and Algeria, to the southwest by
Niger, to the south by both Chad and Sudan and finally to the
east by Egypt. The Libyan economy is primarily dependent
on oil sector revenues which makes up almost all export
earnings and around a quarter of the GDP (gross domestic
product).
The Libyan banking sector has experienced significant
developments particularly following the issuance of laws
concerning banks and money by the Central Bank of Libya.
In 2005, the Central Bank of Libya played a key role in
organizing banks and restructuring capitals inducing them to
look for investment opportunities in order to compete in the
provision of services akin to that of international banking
services and in order to attract depositors and investors to
increase the equities and complete the capital. These laws
urged banks to have a capital not less than 30 million Libyan
dinars. Consequently, banks initiated their new marketing
services that used to be lacking in Libya including the Visa
Card, Electronic Bank Services, Mobile bank, Western
Union and Money Gram. In addition, top financial
institutions looked to satisfy the customers‟ needs and
demands for their survival and successful competition in the
current dynamic corporate marketplace.
Financial institutions generally believe that customers are
the aim behind their services and hence their activities
depend on their customers. This is why financial institutions
are more concerned with customer satisfaction, customer
loyalty and their retention (Zairi, 2000) [5]. In fact, customer
loyalty stems from the organization‟s creation of benefit for
customers so they will be retained and continue doing
business with the organization (Anderson & Jacobsen, 2000)
[6].
The main issue being faced by the Libyan banks is that most
of them are still being driven under the operation of the
outdated programs. Another issue is the lack of qualified and
experienced workforce which eventually explains the low
quality service delivery to their customers.
Owing to this reason, most banks have developed a method
to tackle customer problems. This includes the provision of a
suggestion box at the banks‟ foyer or entrance and the
carrying out of a survey with the aims of realizing customer
satisfaction. This indicates that to hold the customers‟
attention and loyalty, it is imperative for banks to set up
suggestion and complaint sections like hotlines, 24-hour call
services as well as online services (Ahmed Freed, 2012) [7].
Thus, the research objective is to determine the key factors
influencing the level of customer satisfaction in Libyan
commercial banking.
II. LITERATURE REVIEW
A significant level of customer satisfaction is among the
Study of Customer Satisfaction in the Banking Sector in
Libya
Logasvathi Murugiah and Haitham Ahmed Akgam
Journal
of Economics, Business and Management, Vol. 3, No. 7, July 2015
DOI: 10.7763/JOEBM.2015.V3.264
Manuscript received December 10, 2013; revised February 25, 2014.
The authors are with the Universiti Utara Malaysia, CO 06010 Malaysia
(e-mail: logasvathi@uum.edu.my).
674

most critical indicators of the business‟s future. Customers
who are satisfied are also loyal and this ensures a consistent
cash-flow for the business in the future. In addition, satisfied
customers are often characterized as less-price sensitive and
they are more partial to spend more on the products they have
tried and tested before. Moreover, stability in business
relations is also beneficial where the positive quality image
minimizes the cost for a current customer (Matzler, et al.,
1996) [8].
According to Hokanson (1995) [9], satisfaction refers to a
feeling or a short term attitude that can change owing to
various circumstances. It exists in the user‟s mind and is
unlike observable behaviors like product choice, complaint
or repurchase. In a related study, John & Linda (1976) [10],
investigated the relationship between expectations,
performance and satisfaction. The findings revealed that
when a customer judges the performance of a product, he
usually compares a set of performance outcomes that are
expectations. The product is then likely to be considered as
dissatisfactory or satisfactory.
Similarly, Anderson & Sullivan (1993) [11] examined the
antecedents and outcome of firms‟ customer satisfaction and
found that quality falling short of expectations have higher
impact on satisfaction and retention compared to those
exceeding expectations. They also revealed that satisfaction
positively affects repurchase intentions and both positive and
negative disconfirmations increase with the ease of quality
evaluation.
Among the many studies in literature dedicated to customer
satisfaction in banks, Albro‟s (1999) [12] study in the context
of Washington, U.S., utilized a benchmark involving bank
customers from all geographic areas and bank assets. The
study involved asking customers various questions
concerning their satisfaction with the banks. Data collected
was utilized to benchmark customer satisfaction scores of
banks participating in the financial client satisfaction index.
The findings revealed that the most significant attributes that
results in satisfaction include human interaction issues like
„correcting errors promptly‟, „courteous employees‟ and
„professional behavior‟. Moreover, the findings also revealed
that the provision of good, personal service is considered by
the clients as more important more than convenience or
products.
conducted in Washington and it revealed that customers
taking the customer satisfaction survey bought more products
compared to the control group that were not participants to
the survey. According to the authors, survey participation is
what led the customers to develop more positive perceptions
towards the company and it convinced them that the firm
values and cares about its customers and their feedback.
On the contrary, if the firm is derelict in serving the
customer, they will not hesitate to switch to another financial
institution. According to Aldisert (1999) [14], customer
satisfaction is not becoming significant in a way that some
banks view it as a main element in their marketing strategies.
The term „after marketing‟ has also been commonly utilized
to reflect the concentration on expending effort to cater to
current customers in an attempt to increase their satisfaction
and to retain them (Vavra, 1997) [15].
Customer loyalty is defined as “the market place currency
of the twenty-first century” (Singh & Sirdesh, 2000) [16].
Similarly, Foss & Stone (2001) [17] related customer loyalty
to the customer‟s thoughts and actions. Several customer
loyalty experts describe loyalty as a state of mind and a set of
beliefs. Among the main elements of loyalty are the
information exchange and the relation between the state of
mind and behavior. For instance, loyal customers often
provide information to service providers because of their
sense of trust in them and they expect the service providers to
utilize the provided information to their advantage. Moreover,
customer satisfaction leads to customer loyalty which in turn,
leads to profitability (Hallowell, 1996) [18].
Study related to customer satisfaction in business service is
the one by Nawak& Washburn (1998) [19]. They revealed
that service quality has a highly significant relationship with
overall customer satisfaction. First, they revealed that
product quality is a critical element of presentation. Second,
the significant relation between timeliness and cost
management could support the saying “time is money” in the
context of business response to market changes. The third
most critical contributor to overall customer satisfaction was
revealed to be service quality.
Moreover, Rod, Ashill, Carruthers& Shao (2009) [20]
stated that overall internet banking service quality is
significantly related to overall customer satisfaction in New
Zealand banks. They added that the delivery of high quality
online service is called for, for the maintenance or
enhancement of the banks‟ customer satisfaction.
Widespread support has been dedicated to the general
notion that customer satisfaction is a key variable for
evaluating and controlling bank marketing management
(Howcroft, 1991) [21]. Additionally, the main role of service
quality in the realm of financial service delivery has been
stressed by authors (Avkiran, 1994) [22]. Despite the fact that
the constructs of both service quality and satisfaction are
often interchangeable, the significant body of research has
attempted to clarify the nature of the relationship between
them (e.g. Bitner, 1990 [23]; Cronin & Taylor, 1992 [24];
Parasuraman et al., 1991 [25]). Moreover, based on Oliver‟s
(1997) [26] review of the issues, service quality is an
antecedent to satisfaction and it is by nature, non-experiential,
which is not unlike attitude in nature that can be developed
from other sources like word of mouth. Despite the
acknowledgement of the multi-attribute nature of both
constructs, over the years, researchers have been focusing on
the identification of the attributes and expansive dimensions
of service quality. Prior works in the topic differentiated
between technical and functional quality and stressed on the
significance of the functional or service delivery as an
element of consumer evaluations. This distinction has
Journal
of Economics, Business and Management, Vol. 3, No. 7, July 2015
influenced later works where researchers (Parasuramanet al.,
1988 [27], 1991 [25]) investigated the dimensionality of
service quality. Other later works like Smith (2000) [28],
provided the following three elements of the service process
in addition to outcome; access/convenience, human elements
comprising of the combination between instrumental and
expressive qualities and finally, tangibles.
The above findings were consistent with Wan, W. W., Luk
C. L & Chow (2005) [13] findings. The latter study was also
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III. METHODOLOGY
Data was obtained for this study from a simple random
sample of bank customers in the most Libyan cities without
limited to specific city, or specific branch. Sampling is taking
a fraction of a population to represent the whole population
but the researcher only managed to find 150 people to
become respondents. Population is a group of people that can
involve in the research. Selection of the population is
depending on the research conducted by the researcher.
Respondents for questionnaire were randomly selected from
customer who visited the sampling locations during the chose
time intervals, in order to eliminate the sampling frame errors
and ensure the representation of the population under the
study in the sample units. However, sampling is taking a
fraction of a population to represent the whole population but
the researcher only managed to find 150 people to become
respondents. Population is a group of people that can involve
in the research. Selection of the population is depending on
the research conducted by the researcher.
Samples are to be made of groups of research. It is a subset
or sub-groups in the population selected. Sample reflects the
population selected. Researcher use convenience sampling as
sampling method. Researcher use this method in order to
determine the sample involve in this research. Through this
convenience sampling, each customer who makes transaction
with all Libyan banking has equal opportunity to be selected
as respondents. They are representing of the populations
research. Purposely researcher chose this method in order to
avoid an imbalance in the selection.
In data collection process, the researcher obtained the data
using primary data design. In this research, the researcher use
questionnaire as medium to collect data. There are twenty six
questions answered by all respondents. The questionnaire is
divided into five parts/sections. Part one consists of questions
about your demographic profile; continue with part two about
the service quality, the third part about customer loyalty, the
fourth part trust, and the last part about customer satisfaction,
In order to evaluate the effectiveness of this research,
researcher use questionnaire as primary resource. Forming of
the questionnaire is to see the relationship between
independent variables that can influence dependent variable.
In questionnaire distribution process, the researcher
explained about the definition of the questions and the
purpose of this research to the respondent. The researcher
together with the respondent while they answering the
questionnaire. This is to make sure the questionnaire return
back and respondent answering in good.
In this study the researcher will examine how the
independent variables affect the dependent variable. Hence
the dependent variable is customer satisfaction, and the
independent variables are Customer Loyalty, Service Quality,
and Security.
This study has used quantitative research approach. The
statistical software SPSS version 19 was employed to ensure
the relevant issues is examined in a comprehensive manner.
Multiple regression analysis was used to test and examine the
hypothesis in the research framework.
IV. FINDING
Table I shows the adjusted R square is 0.380 or 38% of the
variance in Customer Satisfaction has been significantly
explained by 1% change in the three independent variables
namely, customer loyalty, service quality and security.
TABLE I: MODEL SUMMARY
R R-square Adjusted R-square
0.624c 0.389 0.380
Predictors: Constant, customer loyalty, service quality, security.
TABLE II: COEFFICIENTSA ANALYSIS
Standardized
Coefficients t
Beta
(Constant) 7.269
Customer
Loyalty 0.522 9.401***
Service
Quality 0.519 6.178***
Security -0.303 -3.595***
Note: ***, ** and * denotes significantly at 1%, 5% and 10% level of
significant respectively.
A. Dependent variable: Customer satisfaction.
Table II shows the coefficients for each model tested.
Notice that all models are statistically significant with
p-value less than 0.05(p< 0.05) the meaning of that every
single predictor variable has contribution in the outcome
variable.
Table II also shows coefficients analysis to the variables
influencing customer satisfaction. The result indicates that a
1% change in customer loyalty leads to 52.2% increase in
customer satisfaction. This result suggests that customer
loyalty is the major factor in influencing customer
satisfaction. There is a significant and positive relationship
between customer loyalty and customer satisfaction (t-
statistic = 9.401, p<0.01). The positive relationship indicates
that the higher the customers loyal are expected that the bank
provide a higher customer satisfaction in respective banks.
Customer loyalty as a major determinant has been supported
by past studies such as Luiz Moutinho & Anne Smith (2002)
[29].
Customer loyalty refers to the extent of the customer's
desire to continue to deal with the bank and not dealing with
the alternatives offered by other banks. This study shows that
there is positively correlated between customer loyalty and
customer satisfaction. The bank customers in Libya prefer
transaction with the banks which they feel it's they belongs.
Likewise, as for service quality the result indicates that 1%
change in service quality leads to 51.9% increase in customer
satisfaction. Almost same with customer loyalty, this result
suggests that service quality also has a big influence on
customer satisfaction. There is a significant and positive
relationship between service quality and customer
satisfaction (t-statistic=6.178, p<0.01). The positive
relationship indicates that the higher the service quality is
expected that the bank provide a higher customer satisfaction
in respective banks. The second hypothesis assumed that
there is positive relationship between service quality and
customer satisfaction in the banking sector in Libya. These
results imply that when service quality is high, the customer
satisfaction will be also high. The results also show that the
customers are satisfied with the quality of service that is
provided by banks‟ staff.
While security represents that 1% change in security leads
Journal
of Economics, Business and Management, Vol. 3, No. 7, July 2015
676

to 30.3% decrease in customer satisfaction. This result
suggests that security has influence on customer satisfaction.
There is a negative relationship between security and
customer satisfaction with a statistical significant (t-statistic=
-3.595. The negative relationship indicates that less security
is expected that the bank provide more customer satisfaction
in respective banks. The negative relationship indicates that
high security provide less customer satisfaction due to high
documentation and other banks procedures in applying or
getting banking products and services.
V. CONCLUSIONS
Generally this study can conclude that customer
satisfaction has positive relationship with customer loyalty
and service quality but a negative relationship with security.
This study also finds that customer loyalty the main factors
influencing the level of customer satisfaction in Libyan
commercial banking.
Due to the wide variation of the responses, both public and
private banks need to consider the weak areas in order to meet
customer requirements. Hence, to be successful in banking
sector, banks must provide service to their customer that at
least meets or better if exceeds their expectations, and this
study provides some sort of guidelines to the policy makers
(managers) of banks to take appropriate decisions to improve
the quality of services in Libyan banking sector
In this study we give the practitioners more motivation to
find new ways to improve the services provided to customers,
as well as the pursuit of change the services provided, for
example Islamic finance services substitute for traditional
services, as well as to speed up services in light of high
quality banking services. We also give contribution to parties,
individual or institutions. Hence the current research can be
as reference for further research in future, especially those
researches related to service quality, customer satisfaction,
customer loyalty and customer intention to switch.
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Logasvathi Murugiah was born in Penang, Malaysia
in 1979. She successfully finished .D. (Banking)
in 2011 from Universiti Utara Malaysia, Malaysia. She
is senior lecturer at School of Economics, Finance and
Banking, College of Business, Universiti Utara
Malaysia, Malaysia. Dr. Logasvathi Murugiah research
interests are in the field of financial literacy, banking
and offshore banking.
Haitham Ahmed Akgam was born in Libya in 1979.
He successfully finished his master of science in
Banking in 2013 from Universiti Utara Malaysia,
Malaysia. Haithamresearch interests are in banking
and customer satisfaction.
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