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

Sarah Khan

MS Thesis In MBA

COMSATS Institute of Information Technology Lahore- Pakistan

A Thesis Presented To COMSATS Institute of Information Technology, Islamabad

In partial fulfillment of the requirement for the degree of MS (MBA Finance)

Sarah Khan

Name

Registration Number

Sarah Khan

CIIT/SP14-MBO-010/LHR

Supervisor

DR.Waheed Akhter

Professor Department of Management Sciences, Lahore Campus,

COMSATS Institute of Information Technology (CIIT) Lahore.

Month of Submission with Year <<May, 2016>>

Final Approval

This thesis titled

Service Quality and the Moderating Effect of

Shari’ah Perception on Client Satisfaction; A

Comparison of Islamic and Conventional Microcredit in Pakistan By

Sarah Khan

CIIT/SP14-MBO-010/LHR

Has been approved

For the COMSATS Institute of Information Technology, Lahore

External Examiner: ________________________ _________________

DR…………………………………..

Supervisor: _ _

DR.Waheed Akhter

Professor Department of Management Sciences,

Lahore Campus

Co-Supervisor (where required): ___________________________ ______

Name Department/Campus

HoD: _____________________________________________ _

Abdus Sattar Abbasi(Department of Management Sciences, Lahore)

Declaration

I <<Sarah Khan>> hereby declare that I have produced the work presented in this thesis, during the scheduled period of study. I also declare that I have not taken any material from any source except referred to wherever due that amount of plagiarism is within acceptable range. If a violation of HEC rules on research has occurred in this thesis, I shall be liable to punishable action under the plagiarism rules of the HEC.

Date: _________________ Signature of the student:

<<Date of Thesis Submission>>

____________________________

<<Sarah Khan>>

<<CIIT/SP14-MBO-010/LHR>>

Certificate

It is certified that <<Sarah Khan CIIT/SP14-MBO-010/LHR>> has carried out all the work related to this thesis under my supervision at the Department of <<Management Sciences>>, COMSATS Institute of Information Technology,

<<Lahore Campus>> and the work fulfills the requirement for award of MS degree.

Date: _________________

<<Date of Thesis Submission>> Supervisor:

___________________________

<<DR, Waheed Akhter >> <<Designation of the

Supervisor>>

Head of Department:

_____________________________

<<Abdus Sattar Abbasi, HOD Designation>>

<<Department of Management sciences, Lahore>>

ACKNOWLEDGEMENTS

Allah Almighty, with name of Him who is the most merciful, the most beneficent. I am really thankful to ALLAH for His countless blessings. I do pray for more blessings, complete success in life of this world and life hereafter. Allah has equipped every human beings with full senses and give knowledge to illuminate the ways in darkness by giving literacy. Through this, human is able to find direction. I pay heartedly tribute to the Hazrat Muhammad (SAW) as he is the role model for whole Muslim Umah.

I am thankful to my mother, brother and supporting teachers who motivate and encourage me. I pay thanks to my supervisor Dr. Waheed Akhter for his support and thorough guidance and supervision.

ABSTRACT

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

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.

Abstract……………………………………………………………..……………viii

List of tables…………………………………………………………………………………………….xii

List of abbreviations……………………………………………………………….xiv

Chapter 1: Introduction…………………………………………………………………1

1.1 Aims and Objectives…………………….…………………………………….6

1.2 Rationale and motivation ……………….………………………………….6

Chapter 2: Literature Review……………………………………………………….11

2.1 Overview…….….…..…………………………………………………11

2.2 Historic studies…………………………………………………………11

2.3 Hypotheses and theoretical framework….………………………………….16

2.4 Literature Summary……………………………………………………19

Chapter 3 Microfinance and microcredit Overview…….……………………..25

3.1 Global Overview……………………………………………………….25

3.2 Asia-Pacific and South Asian Overview ……………………………………27

3.3 Microcredit in Pakistan….…………………………………………….29

3.3.1 Conventional Microcredit in Pakistan…………………………….30

3.3.2 Islamic Microcredit in Pakistan…………..…..…..…………..31

Chapter 4: Methodology………………………………………………………….37

4.1 Research methodology ……………………………………..……..…..37

4.1.1 Target Population…….………………………….…………….38

4.1.2 Sample Size and Technique….…………………….………….38

4.1.3 Research Design………………………………….…………..38

4.1.4 Research Strategy………………………………….…….……39

4.1.5 Research method …………………………………………………………..39

4.1.5.1 Questionnaire….. …………………………………………………….39

4.1.5.2 SPSS Process……………………………………………..40

4.2 Limitations and difficulties…………………………………………….41 Chapter 5: Results…………………………………………………………………..42

5.1 KMO & Bartlett’s test and Reliability/ Cronbach’s α…………………42

5.2 Descriptive Statistics Comparison (CMI and IMI)……………………42

5.3 Correlation Comparison (CMI and IMI)………………………………….46

5.4 Model Summary (Comparison of CMI and IMI)………………………49

5.5 Comparison of Significance Level (CMI and IMI)………………………53

5.6 Comparison of coefficient multicollinearity (CMI and IMI)……….…58

5.7 Discussion of hypothesis summary……………………………………60

5.8 Comparison……………………………………………………………..61

Chapter 6: Conclusion, Implications & Recommendations………………………….64

6.1 Conclusion…………………………………………………………….64

6.2 Implications…………………………………………………………….65

6.3 Recommendations…………………………………………………………65

Chapter 7: References………………………………………………………………67 Appendix I MFI List in Pakistan………………..…………………………………..76

Appendix II MFP list in Lahore………………..………………………………………78

Appendix III Questionnaire………………………………………..…………….79

Appendix IV Demographics for CMIs……..……………………………………..83

Appendix V Demographics for IMIs……..………………..………………………89

Appendix VI Calculations for CMI and IMI (MODEL 1 AND MODEL 2)…….94

LIST OF TABLES

Table 2.1: Literature Summary………………………………………………………….19

Table 3.1: Forecasted Portfolio of Growth of Global MFI Regions 2015………………26

Table 3.2: Institutional Development ………………………………………………………26

Table 3.3: MFI countries in South Asia (2014)….………………………………………27

Table 3.4: IMIs 2015……………………………….……………………………………32

Table 3.5: CMIs 2015…………………………………………….…………………………33

Table 5.1: KMO & Bartllet’s Test……………………………………………………42

Table 5.2: Reliability/ Cronbach’s α………………………………………………43 Table 5.3 Descriptive Statistics (Gender & Age)…………………………………44

Table 5.4 Descriptive Statistics (Income & Education)..…………………………45

Table 5.5 Correlation of variables (Comparison CMI and IMI)…………………….47

Table 5.6 Correlation of moderation (Comparison (CMI and IMI)…………………48 Table 5.7 Model Summary Comparison (CMI and IMI)…………………………52

Table 5.8 Comparison of Significance Level for Model 1 (CMI & IMI)…….…..55

Table 5.9 Comparison of Significance Level for Model 2 (CMI & IMI)…….…….56

Table 5.10 Comparison of Significance Level for Model 1 & 2 (CMI &IMI)…….57

Table 5.11 Comparison of coefficient multicollinearity for Model 1 (CMI &

IMI)……………………………………………………………………58

Table 5.12 Comparison of coefficient multicollinearity for Model 1 (CMI &

IMI)……………………………………………………………………59

Table 5.13: Hypotheses Summary…..…………………………………………………60

Table 5.14: Parameter’s Comparison (R, R-Square, F and Sig.)…..……………………..62 Table 5.15: Parameter’s Comparison (t-value and p-value)……..……………………….63

LIST OF ABBREVIATIONS

MFI Microfinance Institutions
IMI Islamic Microfinance Institutions
CMI Conventional Microfinance Institutions
RCDS Rural Community Development Society
DAMEN Development Action For Mobilization And Emancipation
ISO International Standards Organization
MFP Microfinance Provider
SBP State Bank of Pakistan
NGO Non-Governmental Organizations
SQ Service Quality
SP Shari’ah Perception (of the clients).

(Shari’ah is set of laws and principles in Islam while the Shari’ah perception is envision or illusion or mindset of clients about the

Shari’ah.)

CS Client Satisfaction
IMC Islamic Microcredit
CMC Conventional Microcredit

Chapter 1 Introduction

Client’s satisfaction is vital element for organization as it determines the level of success. High performance and satisfied clients are considered good assets for an organization. They will be prove as the extension of words from mouth to mouth to market and support the product or service regarding respective organization. In that way, it would help the organization to proliferate, make it to compete strongly in the market (Hamzah 2015). Client satisfaction is a rather new approach for quality in organizations and enterprises. It served to develop pure client centered management and culture (Mihelis 2001). Customer satisfaction could be measured as a meaningful clients’ feedback. In this way, performance of a company might be evaluated based on a set of dimensions for the good and worst points of the organization for measuring satisfaction (Mihelis 2001). In the past few decades, many previous researches have showed that image and reputation of the firm or organization, are considered critical criteria by the clients, through which customers becomes satisfied on readily basis (Erol, Bdour 1989), (Metawa et al 1998) and (K. Naser et al 1999). So we can say, majorly organizations, whether they are service based including financial or non-financial or manufacturing based, they focus on their customers, who at the end have to buy their service or product or rebuy again if they would be fully satisfied.

Client satisfaction is a necessity for survival in the telecommunication (Loke 2011). Because there is huge competition in this industry in past few decades (Loke 2011). The firms with high product customization results in customer satisfaction (Zhang et al 2009). Total quality management is to establish the management system and corporate culture to ensure the customer satisfaction, objectively (Agus et al 2000).

It was vital for financial institutes i.e. banks to fulfill customers’ satisfaction to compete (Hamzah 2015). Different dimensions of service quality was studied and an effort was made to dig out the enhancing dimensions of quality in service towards client satisfaction and client loyalty in a better way for banking sector (Munawar. M. K., Mariam. F. 2014). In the financial sector, it includes banks, financial funds institutions and other nongovernmental organizations. There are many researches present on banking and financial funds institutions while non-governmental organizations have got few light. NGOs major financing activity relates to microfinancing, in which microloans or microcredits are disbursed to poor and needy people.

Microfinance is one of the broader concept which is known as a program that extends the distribution and accessibility of small loans as microcredits to poor people. This allows them to run small businesses or projects that generates income to improve their living standard. Microfinance influences the borrowing pattern of clients from informal sources (Islam, Nguyen & Smyth 2015). This allows them to take care of themselves by selfemployment and their families by fulfilling their basic needs through income generated from optimal utilization of these microcredits.

By doing so, they prosper and successful in meeting their needs. Microfinance has objective to reach the poorest with no other exception (Helth & Dahl 2014). Microcredit is one of the products of microfinance which focused on fighting against poverty. It is common in the developing countries. Microcredit supports self-employment and small business projects to grow and sustain economically. There is concentrated conventional financial system that is extended in the world. The logic behind this was, the people with their savings invest and get banking opportunities. There savings increase with interest element in line. The second most observation is observed, that foreign hand in the fund raising and loans to conventional financial sector is done through their saving to earn on the wide scale rather to make at front to taxation. Biasness of the management of MFI’s loan allocation (Labie, Méon, Mersland & Szafarz 2015). It is a barred way from disappointment of poor people to fill the gap of unavailability of micro loans created by the conventional banks or other conventional microfinance institutions, into a new hope. Because of third major reason, in actual way, there are more than 3 class set up in Bangladesh, Sri Lanka, Bhutan India and Nepal. While there are five classes in Pakistan roughly stated as most rich, rich, middle, poor and most poor. While the most poor and the poor are unable and unwilling to avail these conventional microcredit from conventional microfinance institutions due to huge interest rates, terms & conditions, subtraction of processing fee from the principal amount at first leaving the microcredit amount more smaller and the religious issues relating Riba (Mansori. S. et al 2015). So the forth impacting element through which go against to conventional microcredits is the interest element. So the interest perception is different and widely, it is not considered good for the best utilization of the microcredit. That’s why the clients of conventional microfinance are reluctant. They are not willing to repay the loans and interest payments on the date by utilizing the microcredit. The conventional MFIs give pressure to the clients that’s why they delay even more than the expected time period.

It was observed that clients who used interest free microcredits succeeded to reduce their poverty. They improved their basic needs and living standard better than clients of conventional microfinance banks or conventional MFIs (Iqbal et al 2015). While Islamic microfinance provider is alternative to conventional microfinance provider. The Islamic microcredit is not same as an alternative small loan service to the conventional microcredit, but the objective to remove poverty, to boost the living standards and to be readily available for the poor people on interest free basis, is the main concern for IMIs and Islamic microcredit. It is the availability of financial services which is based on laws and principles of Islamic commercial jurisprudence. Islamic MF and microcredits are based on the ethical and moral value to motivate the micro entrepreneurs to use these small loans by optimal way. These microcredits are free from interest. As people have problem of repayment of principle amount with interest as this is highly charged by bank (Aziz and Alam 2012). The terms and conditions for repayment are quite flexible and determined under the rules of Shari’ah. That’s why the poor and the poorest class of the society are willing to avail the Islamic microcredits for their betterment and welfare. It plays a socio-development role for the society.

Whether there is service or manufacture industry, the management requires to balance their services with the core product or service as per demand of the customer or their expectations. That is supported by one of the factor i.e. service quality. Service quality leads to profitability which in return increase productivity. So higher service quality results higher customer satisfaction (Kwan & Jing 1994). Service quality (SQ) is most important feature of service. The International Standards Organization (ISO) has defined quality as wholeness of product or service in term of having capacity or being able to satisfy or imply clients’ needs (Samuel 1999). Everyone in the company is linked with the continuous improvement process including its customers and other stakeholders. But now a day, major focus is given to the customer satisfaction because this is what you are trying to fulfill his/her demands. There is antecedently positive link between service quality, perceived value and trust with customer satisfaction and loyalty (A. Rasheed, Abadi 2014). There were simultaneous influence on client satisfaction and loyalty through the client’s mindset about service quality, having direct influence customer satisfaction in Indonesia (Segoro 2013).

Borrowers of microcredit from Islami Bank are emerging precisely working to reduce poverty and instability as well as improving socioeconomic status after accessing microcredit by clients (Bhuiyan, C. Siwar, A. Ghafar I. & B. Talib 2011). The major reason behind it the Shari’ah based credits. Shari’ah is set of laws and principles in Islam while the Shari’ah perception is envision or illusion or mindset of clients about the Shari’ah. Islamic microfinance reduces the part of financial intermediaries demanded by financial sector by Shari’ah. So overall this concept also applies on Islamic microcredit too. With the passage of time, many initiatives and steps have made to eradicate poverty in developing Muslim countries. Therefore, this notching concern is purely related to Islamic financial principles in terms of Shari’ah compliance product and services. We are looking into Shari’ah perception of Islamic microcredit that is used as instrument to mobilize the fund, being Shari’ah compliant for microcredit, managing risk in Islamic microcredit resulting the sustainability and poverty reduction.

Major concern, of many organizations, revolves around their customer needs and their fulfilment which leads to meet their expectations and ends on customers’ satisfaction. Satisfaction is conglomeration of feeling of happiness when a person is succeeded to achieve his or her goals, wants or motivation (Boonlertvanich, K. 2011). Customer or

Client satisfaction is a compulsory factor to maintain the clients’ behavior stable for long run (Ndubisi, O.2004). The banking sector has criteria to meet clients’ needs and convert it to their satisfaction towards service quality. Due to immense competition in the financial sector, the financial institutions have two important factors to influence the clients’ overall satisfaction about services. The first is the quality service and the second is the fulfillment of the needs. This play a vital role for clients’ satisfaction itself which leads to propel the efficiency of the organization to the positive side of the scope. Through evidences that some service provider’s behavior precipitate customers to switch through mediation of customer satisfaction (Antón et al 2007). They stated that the low level of service quality and low firm commitment lead to low client satisfaction. While it had bad and indirect effect on switching intentions which leads to increase of switching rate or clients from one to another MFI.

There was more concentration given to service quality after client satisfaction. Service quality was important element to compete in the market by differentiation and retained customer satisfied to get long-term benefits (Othman &Owen 2001), (Caruana 2002) & (Curry & Penman 2004). While Othman and Owen considered the service quality with relevant to having high quality religious value (Shari’ah complaint services and Shari’ah perception) because it’s basis are rely on the concept of religion (Islam) by the customers in 2001. Service quality and the Shari’ah aspects were concerning points integrating for the customer satisfaction. Likewise Abdullah, Adnan and Sidek in 2012 examined customers’ perception about the Islamic banking products and services (while Islamic products are based on Shari’ah and this perceptions actually linked Islamic products. That’s mean Shari’ah perception.).

Most previous research as discussed above, on customer or client satisfaction had comprised of individual relationships of variables that had direct and immediate effects on client satisfaction, instead of this, analyzing it in moderating relationship with Shari’ah perception. That is more complex than it seen. This research will provide some new aspects that service quality of some service providers precipitate directly or indirectly to client satisfaction. This differentiation effect is figure out through the moderating effect of Shari’ah perception. This research gap is found to work on, in this research work. That’s why this research work is based on service quality and Shari’ah perception, are integrated to wider financial services. To figure out the result of this from both perspectives i.e. Islamic microcredit and conventional microcredit, here are objectives of this research are followed.

4.1 Aims and objectives

In this research work, main concern revolves around the analysis and evaluation of existed and current knowledge and practices with effect of moderating relationship to client satisfaction regarding service quality (SQ) activities and Shari’ah perception for microcredit in microfinance from Pakistan. In the very simple words, the gap between service quality (SQ) and client satisfaction (CS) is trying to figure out and the moderating effect of Shari’ah perception on client satisfaction will be figure out. In the nut shell of the entire crux compare the Islamic microcredit and conventional microcredit.

Most previous research on customer or client satisfaction had point out the independent relationship of service quality and client satisfaction. These had direct effect on client satisfaction instead of analyzing the moderating role of Shari’ah perception. This research provides some new aspects that some service provider’s service quality precipitate directly or indirectly to client satisfaction. This different effect is observed through the moderating effect of Shari’ah perception”. To figure out the result of this from both perspectives i.e.

Islamic microcredit and conventional microcredit.

There are following objectives of this study,

To investigate the role of service quality with respect to client satisfaction.
To investigate the role of Shari’ah perception with respect to client satisfaction.
To figure out the moderating role of Shari’ah perception between service quality and client satisfaction.
To identify the difference between Islamic and conventional microcredit clients with respect to service quality, Shari’ah perception and client satisfaction.

4.2 Rationale and motivation

Microcredit itself is a new field while Islamic microcredit is new field in MFI within both the Islamic finance and microfinance on commercial basis. There is limited area of Theory and practice. But there is growing interest in it. It has been become special area when it appear to share many synergic aspects of risk sharing, economic justice and increase level of entrepreneurship. Many banks and MFI were doing the same thing within conventional window but the reason of Islamic microcredit was “free from interest (Riba). Through this, many poor people were unable to get the conventional microcredit.

The economic justice paralyzed due to banking arena. Apart from banks, Other MFIs, took step to reduce this. There are conventional microcredits offers from conventional CMIs more or less same as banks do on interest basis and Islamic microcredits from Islamic IMIs free from interest based mechanism. So the ignorance of poor were solved who want to get microcredits by Islamic microcredits by IMIs.

We cannot say that the microfinance sector is unpopular in Muslim countries. There is a contrary situation in these countries. There are many MFIs in Muslims countries including Pakistan, working successfully. People are well aware of Riba and interest based products. But the reason to choose the Islamic or conventional is based on the need and time basis being very poor, that they choose conventional microcredits. But most of them never compromise on these elements and focus on their religious values by choosing Islamic microcredits. The matter effects with the passage of time that Islamic microcredits allows every possible and positive effect on the economic level of the poor.

Islamic microfinance is market of huge potential in Pakistan. It is potentially improving the economy and social responsibility by supporting and helping hand to people who are in high need of financial support. Through which they generate employment or run small business.

Pakistan is such type of a country where conventional microfinance, Islamic microfinance are working independently, where Islamic and conventional financial sectors exist. There is a hope that Pakistan have such capability to become leader in producing Islamic microfinance institutions and giving optimal level of utilization of Islamic microcredits. That are equally commercially and economically good to eradicate the poverty and improve the economic stability. In fact it is Islamic microcredit is a good alternative for economic justice.

These determinants, client satisfaction, service quality and Shari’ah perception, are playing vital role in microcredit in microfinance sector, whether the conventional or Islamic, for economy of Pakistan. Client satisfaction is one of the major objective of any organization. The Shari’ah perception is playing moderating role between the service quality and client satisfaction for both the clients of conventional and Islamic microcredit in CMIs and IMIs respected. Our major focus remain on the MFP of Pakistan including conventional microfinance institutions i.e. RCDS and DAMEN, while Islamic microfinance institutions i.e. Akhuwat and Kashf, providing the microcredit service. The findings show that there are 3.7 million borrows of Islamic and conventional MFIs in combine form, while 578 is the sample size of this research, 289 clients from Islamic and 289 from conventional side. The data is collected on questionnaire basis while these questionnaire are filled on verbal basis from illiterate clients. The correlation, regression, ANOVA and interaction test are used to figure out the results.

There is significantly positive association between service quality, Shari’ah perception and client satisfaction for IMIs and CMIs 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 depicts that these determinants are significant. On the basis of these results, Islamic microfinance institution can capture more clients from conventional microfinance institutions because according to interest perception (appendix IV and V), client of CMIs are not given positive response to interest.

We are going majorly in sequence i.e. Literature review, hypothesis, theoretical framework, microcredit view in conventional and Islamic side at global, south Asian and Pakistan, methodology, results, hypothesis summary discussion, comparison, implications and the conclusion.

In chapter 2, major literature review is given with the relevant studies according to variables of this study with in conventional and Islamic microcredit perspective. Literature summery is also supported by the hypothesis and the models. As we figure out from there, client satisfaction is dependent variable while service quality is independent variable from different sectors, is explored by historic studies. While the moderating effect of Shari’ah perception is kept out as gap from literature review and it moderates the service quality and customer satisfaction relationship on predicted basis in this chapter. It follows by five hypotheses to prove the significance and moderation of two suggested models i.e. model 1 and model 2.

While in chapter 3, on the basis of studies, facts and figures from chapter two, microcredit overview at global, Asia-Pacific & south Asian and Pakistan are explained with their relevant updated facts. The selection of foundations are given, KASHF, AKHUWAT for Islamic microcredit while RCDS and DAMEN for conventional microcredit. Asia-Pacific & south Asian have high forecasted growth percentage in global overview. So we choose south Asian countries as they have more volatile and unstable economies and political situations, where there are more chance for MFIs to grow. The countries having conflicts, political threats, unstable economies and need to rehabilitate the natives, required microfinance organizations to work (Nagarajan 1999).

Chapter 4 is based on the methodology consisting on target population, sample size, research design, research strategy, research method, questionnaire, SPSS process, limitations and difficulties. The clients are selected from MFIs of Pakistan. The selected MFIs are majorly based in Lahore due to their head offices in Lahore. Four MFIs are selected KASHF, AKHUWAT for Islamic microcredit while RCDS and DAMEN for conventional microcredit on the basis of random limit of 1,000,000 USD value of loans disbursed. This data is taken by the end of 31 December 2015.

These chapters are followed by chapter 5 relating the results. Reliability test, correlation, regression, ANOVA and T-test are done on independent status of model 1 and interaction test added as one extra test for model 2. The rest of this chapter is based on discussion of that results. This study has identified significant impact of service quality and the moderating role of Shari’ah perception on client satisfaction in case of Islamic microfinance institutions and conventional microfinance institutions.

While chapter 6 has included the conclusion, implications and recommendation. This has identified the gap between the common thoughts and mindset about the Shari’ah perception that unlike it is not effecting the conventional microcredit clients but in fact it is effecting clients of conventional microcredit as it is effecting the clients of Islamic microcredit. While giving future research spaces by incorporating interest rates, switching cost, service perception and client loyalty. This research recommends to policy makers of regulatory authority of NGOs which is SECP and the strategy makers of MFI, i.e. the mangers of MFIs.

While the chapter 7 is consisted on the references of the subjected literature and facts & figures. The extensive details and calculations are given in appendixes.

Chapter 2 Literature Review

2.1 Overview

This literature review comprises on five sections i.e. conventional microcredit, Islamic microcredit, service quality, Shari’ah perception and client satisfaction. First two sections of literature cover the two major sectors on microcredit under microfinance i.e. conventional and Islamic microcredit. These are followed by selected variables, i.e. client satisfaction, service quality, Shari’ah perception under the context of microcredit of microfinance. The country with high loan disbursed by MFI, tended to reduce the poverty level per capita by MFIs (Kamal and Jalel 2015). He further said that when gross loan portfolio per head would be high and optimally utilized, it would reduce more poverty, as the more accessibility would be spread. It was confirmation of microcredit and its role in eradicating poverty at the large scale. There were higher number of microfinance institutions where there were large population of poor people, as compared to countries where the MFIs in numbers are lower with respect to lower number of poor people (Imai et al 2010). The recent work is figuring out the relationship between the macro steps in economics and microcredit activities with respect to performance. This works as a booster and emulsifier, develop or enhance the economic level by economists through empirical work to determine the impact of microfinance (Imai et al 2012).

2.2 Historic Studies

Poverty is a growing problem while conventional microcredit looks as way to remove poverty of the particular poor people segment. It can help to improve income generation level to fulfil their needs. The aim of conventional microcredit and the CMIs, is to provide financial services to target poor people and SMEs. The studies had emphasized on microfinance as positive tool to overcome poverty and eradicate it which was obviously seen in overall income and expenses, especially in clothing and health by improving living standards of households (Ghaliba et al 2014). It can help them form their own small business and promotes self-employment for both genders to bring economic change. But people with low income, don’t have access to banks or any other formal financial institutions. So the middle class of the society avail them. These are the main clients as so far observed of conventional microcredit. The microfinance sector with targeted market, has huge borrowers group and government has set the outreach goals. But this is not as simple as it seen. The objective of conventional microcredit is quite clear and simple to established systematic change in financial systems worldwide. But this is done on the basis of fewer interest suspension. These interest rates are seen huge by their clients. The repayment rates recommended more negative evaluations of MFP and the purpose to transfer the optimal and stable financial services became more likely to be seriously sabotage (Kabeer 2001). The microfinance institutions ranged interest rate from 15% to 22% for formal institutions, while those for the non-formal institutional sources range from 33 % to 120 % beside (Kabeer 2001, Amin 2003). This is on the board that conventional financial system were not caring about the poor. This has been ethically, morally and spiritually hurting the poor people of rural areas. This is a burning and critical issue now.

There are many NGOs, who are supporting and promoting microcredit in the South Asian region. But they had stop working and cut down their activities in these areas. The reason was based on the failure to establish effective financial services for the poor people. Because they preferred social issues to be solved first then the rest would be overcome (Rutherford 2000).

From these studies, we can infer that poor people are not capable to overcome the stated terms while people from the middle class also not avail conventional microcredit due to interest factor. But the reason of slow growth is that it doesn’t target the entire poor group. The poor people don’t be able to get these loans due to interest payments or the procedures required to follow. There is alternative way of conventional microcredit i.e. Islamic microcredit. While Islamic microcredit is based on a desire of prosperity without the interest factor. This make economic growth, prosperity of social set up and political system which is also based on Islamic principles. It carries similar principles of trading, business, investment opportunities within the Muslim communities as stated by Saad (2012). When the financial becomes stable then it plays an important role in the economic development of any country. The rules of Islamic microcredit is based on major concerned element of interest that it is not allowed while there are also rest of elements are also based on Islamic rules and jurisdiction. It is worth mentioning that Islamic microcredit is different from the conventional microcredit in many prospects but we are separating it on interest base system. According to Obaidullah & Khan (2008), Shari’ah compliant finance was major element to differentiate conventional and Islamic financial institutions. Therefore, Islamic microcredit must comprise on the Shari’ah to be accepted by clients who preferred religious matters, it must be perceived to be as such. Islamic microcredit is now these days are considered as a panacea to eradicate the poverty and increase the social development by enhancing the economic growth with a sustainable pace.

When we are talking about microcredit then first point comes in mind regarding the MFPs. That is customer or client’s satisfaction. The level of success of an organization is determined by client’s satisfaction as it is a vital element for every organization. Therefore high performance and satisfied clients are considered good assets for an organization They will be prove as the extension of words from mouth to mouth to support the organization. It would help the organization to proliferate, make it to compete strongly in the market (Hamzah 2015). Client satisfaction depicted a new thing for quality in organizations and enterprises. It served the development of a purely client based management and culture (Mihelis 2001). Client satisfaction could be measured by direct, on front board and meaningful feedbacks of clients. In this way, performance of a company might be evaluated based on a set of dimensions of client satisfaction that indicated the good or worst points of the organization (Mihelis 2001). In the past few decades, many previous researches have showed that image and reputation of the firm or organization, are considered important by the customers, through which customers becomes satisfied on readily basis (Erol, Bdour 1989), (Metawa et al 1998) and (K. Naser et al 1999). So we can say, majorly organizations, whether they are service based including financial or non-financial or manufacturing based, they focus on their customers, who at the end have to buy their service or product or rebuy again if they would be fully satisfied.

Client satisfaction is a necessity for survival in the telecommunication industry by ensuring satisfies clients at the end (Loke 2011). The firms with high customization rule of product and services with respect to customer’s need, result in satisfied customers (Zhang et al 2009). The main objective of total quality management is to ensure the customer satisfaction by the management system and corporate culture (Agus et al 2000).

In order to be competitive it was vital for financial institutes i.e. banks to fulfill customers’ satisfaction (Hamzah 2015). Different dimensions of Service quality is studied and an effort is uprolling to figure out the dimensions service quality. That may improve clients’ satisfaction and clients’ loyalty in a better way for banking sector (Munawar. M. K., Mariam. F. 2014). In the financial sector, it includes banks, financial funds institutions and other non-governmental organizations. There is many researches present on banking and financial funds institutions while non-governmental organizations have got few light. NGOs major financing activity relates to microfinancing, in which microloans or microcredits are disbursed to poor and needy people.

When we are talking about microcredit then other points comes in mind regarding the services provided by MFPs. First point is adapting service quality. Service quality (SQ) in conventional and Islamic microcredits, had become important because of its relationship to costs apparently (Crosby 1979). The factor of profitability also tangled in the service quality (Buzzell & Gale 1987). Organizations can perform better with better servies provided (Rust & Zahorik 1993). High service quality concerns of the organization, leads to better profitability of organization (Zahorik & Rust 1992). Service quality links to client satisfaction (Bolton & Drew 1991). There is positive relationship between client satisfaction and quality of the service (Boulding et al. 1993). Service quality helps in retaining clients on long run basis (Reichheld & Sasser 1990) and positive word of mouth. SQ was widely regarded as a driver of corporate marketing and financial performance in financial sector for example banking sector (Kwon & Lee 1994) and (Wong & Perry 1991). Whether there is service industry or manufacturing industry, services are provided on the need and demand of the customer. Gap analysis showed the significant relationship between service quality and client satisfaction, at how much level it was satisfied by different dimensions of service quality (Loke et al 2011). This was used to test the link between the service quality and the customer satisfaction (Loke et al 2011). The Islamic bank should be concerned about the quality of service (service quality) and linked to religious view (Othman & Owen 2001). Whether there are conventional or Islamic organizations, financial or non-financial, service quality matters a lot because it is first thing to be get at glance.

Service quality and the Shari’ah aspects were concerning points in the Othman and Owen research work. It was underscored that the Islamic bank are more concerned about the service quality and products/ services which are taken by customers having high value religious matters because it relied on the basis of the concept of religion (Islam) (Othman & Owen 2001). There was high competition existed between Islamic and conventional banking in Indonesia and that’s why they used service quality as a winning strategy (Deasy Wulandaria & Ari Subagioa 2015). The objective of their study was to demonstrate the understanding level of the client based strategy making. It will show the capability in terms of mindset about Shari’ah of the differentiations in the service quality in comparison to Islamic and conventional banking. While Shari’ah perception is the mindset of people including Muslims and non- Muslims about Shari’ah, while Shari’ah is Islamic set of rules and laws. And what the perception means, in very simple words, it is the process of selecting, organizing and interpreting stimuli into a meaningful picture that gives attachments. Obaidullah (2009) focused on the criteria for Shari’ah acceptability of assets for inclusion in Islamic funds.

The lower level of service quality and low organizational commitment lead to low client satisfaction. It had an immediate but resultant effect on switching intentions which lead to higher switching rate of clients from one firm to other (Antón et al 2007). Through their evidence, showed some service provider behaviors precipitate clients to switch which was seen through mediating role of client satisfaction. Client satisfaction once or cumulative satisfaction, it depends on the conceptual theory of each organization (W. Boulding et al 1993).

The majority of the Islamic financial institutions regarding banking clients, were satisfied by service quality provided by their banks. While their relationship between service quality and customer satisfaction was significant (Amin and Isa 2008). In the manufacturing as well as the service industry, both have end user who are their clients or customers. They have to fulfil their customer needs and demands leading to satisfy them. Because their satisfaction concerns with the organizational profitability as Kwan and Jing in 1994.

2.3 Hypotheses:

Service quality is the key to the success of MFI. On the basis of literature review as mentioned above, the main hypothesis in this research is “Service Quality and the Moderating Effect of Shari’ah Perception on Client Satisfaction; A Comparison of Islamic and Conventional Microcredit in Pakistan”.

Service quality is important factor by differentiation and retaining clients satisfied to get long term benefits (Curry & Penman 2004). While to attain competitive edge, compete and get position in the market, there was need of concentration on service quality and client satisfaction (Caruana 2002). Above-mentioned literature makes the basis for hypothesis higher service quality for both perspectives will result in higher client satisfaction

H1: Higher service quality for both perspectives will result in higher client satisfaction.

As Obaidullah & Khan in 2008 said that Shari’ah compliant finance was major element to differentiate conventional and Islamic financial institutions. In conventional finance there was more focus on service side while Islamic microcredit comprised on the Shari’ah to be accepted by clients who preferred religious matters, there preference to Shari’ah is based on Shari’ah perception.

As Amin and Isa (2008) showed that there was a proportion of awareness of Muslims about the products and services of Islamic financial Institutions. That compared highly to nonMuslim clients. The clients of Islamic banking were satisfied.

H2: Higher Shari’ah perception for Islamic microcredit will result in higher client satisfaction. While lesser Shari’ah perception for conventional microcredit will result in higher client satisfaction.

MODEL: 1

Othman and Owen (2001) concentrated on quality of service. He said that services were considered as having high religious value (Shari’ah perception). Because it is relied on the basis of the concept of religion (Islam) by the customers. Service quality and the Shari’ah aspects were concerning points intriguing for the customer satisfaction. Abdullah, Adnan and Sidek in 2012 examined customers’ perception about the Islamic banking products and services (while Islamic products are based on Shari’ah and this perceptions actually linked Islamic products. That’s mean Shari’ah perception.).

On the basis of these above researches and indirect ideas, for my research, there are three hypotheses by using moderation concept and interaction test will applied later on this research. Firstly Shari’ah perception acts as a moderator variable between independent variable i.e. service quality and the client satisfaction which is dependent variable, in both perspectives. We will see and apply this hypothesis on clients of Islamic and conventional microcredit. In other two hypotheses moderation concept is used. Secondly, SQ has stronger impact on CS in presence of Shari’ah perception than SQ has impact on CS alone in Islamic microcredit. Thirdly, SQ has lesser impact on CS in presence of Shari’ah perception than SQ has impact on CS alone in conventional microcredit. For this model 2 is used.

H3: Shari’ah perception acts as a moderator variable between service quality and the client satisfaction both perspectives.

H4: Service quality has stronger impact on client satisfaction in presence of Shari’ah perception than service quality has impact on client satisfaction alone in Islamic microcredit.

H5: Service quality has lesser impact on client satisfaction in presence of Shari’ah perception than service quality has impact on client satisfaction alone in conventional microcredit.

MODEL: 2

Model 1 is based to check the individual independent relationship to the dependent variable. While the model 2 is based on the moderation. In this we have check the fusion of SQ and SP on the CS in form of moderation effect of SP with SQ towards CS.

2.4 Literature Summary

Table: 2.1 Literature Summary

Year	Author	Methodology	Sector	Country	Research Findings
1989	Erol & R.E.Bdour	Qualitative Approach	Islamic and conventional Banking comparison	Jordan	Customers is reputation and image of organization, through which customers becomes satisfied on readily basis.
1993	Bitran & Maureen Lojo	Empirical	Manufacturing and Service sector comparison	Europe	Strength & weakness of service provider according to service quality.
1993	W. Boulding et al	Empirical Findings	Corporate	Global	Perception of dimension of service quality are functions of customer’s prior expectations
1994	Kwan & Jing 1994	Quantitative Approach	Retail Banking	Singapore	SQ (service quality) leads to profitability which in return increase productivity. So higher SQ results higher customer satisfaction.
1998	Metawa and M. Almossawi	chi‐square tests	Islamic Banking	Bahrain	Aware customers have highest satisfaction on IB’s elements of services

1999	Dhumale Sapcanin	&	Empirical	Islamic MFI and Banking	Arab states	Islamic MF as tool for entrepreneurship and making customer satisfied.
1999	K.Naser et al		Quantitative Approach	Islamic Banking	Jordan	Customers becomes satisfied on image of organization.
2000	Agus. A et al		Quantitative Approach	Manufacturing Industry, Corporate	Malaysia	Total quality management is to ensure client satisfaction by establishing the management system and corporate culture.
2001	Othman Owen		Validity Significance (weights & percentages)	Islamic Banking	Kuwait	Service Quality (Carter with 34 elements) Islamic Banks
2002	Caruana, A		Regression and ML estimators	IT and Banking	Malta	Customer satisfaction as mediator, played role between service quality and service loyalty
2004	Curry, A & Penman, S.		Qualitative	IT and Banking	Scotland	Proper use of technology in banking leads to customer relationship better.
2005	Khandker		Panel data approach	MFI	Bangladesh	MF loans results in lowering poverty

2005	Ferro	Qualitative	Islamic and global Banking	Global	Islamic MF with product diversification, create value.
2008	Mcintosh, Villaran & wydick	Retrospective panel data	Households	Guatemala, India, Ghana	Discrete events in MF improve households’ living.
2008	Obaidullah & Khan	Cases, empirical/ qualitative	Islamic Banking	Muslim countries around the globe	Micro, meso and marco level application of Shari’ah complaint products
2009	Obaidullah. M	Qualitative	Islamic Funds Industry/ Islamic Banks	Saudi Arabia	Shari’ah acceptability of assets for inclusion in such equity funds
2009	Zhang. Q. , Mark A. Vonderembse & Mei Cao	Mediating, moderating, and additive models	Manufacturing industry	Global	The firms with high product concept flexibility with respect to customer’s need, act independently and additively to predict customer satisfaction
2010	Imai et al	Binary Treatment Effect( Tobit & Propensity Score matching model)	Microfinance Institutions	India	Poverty reduction by MFI loans are more in rural than urban areas.

2011	Bhuiyan et al	Qualitative analysis	Islamic Banking/ Islami Bank	Bangladesh	Islamic microcredit is an alternative approach to enhance the socioeconomic status by accessing it and reduce poverty instead of conventional
2011	Loke et al	T-Test	Telecommunication	Malay, China and Indian	Service dimensions are significant and positively influenced clients’ attitudes in terms of satisfaction and loyalty.
2012	Imai et al	Cross sectional & Panel data approach	Microfinance Institutions	Developing countries	Higher MFI loans leads to lower poverty indices
2012	Saad	Quantitative (Frequency& percentages)	Islamic MFI	Bangladesh	Islamic MF product diversification( MF outreach),Suitable Islamic microfinance products for suitable activities to implement in AIM
2013	Segoro	Structural Equation Modeling	Cellular industry/ Telecommunication	Bandung Indonesia	Client perception on quality of service and relationship quality have positive correlation with mooring factors
2014	Zuraidah et al	Empirical	Islamic MFI and Conventional MFI	Malaysia	Fund Transfer, entrepreneur at micro level, social development and liabilities through Islamic and conventional MF.

2014	Rafay, Tanveer, Babar, Safdar, Mobashir and Abid	Qualitative and quantitative both. Case study on akhuwat	MFI	Pakistan	Interest free microcredit generate good livelihood and income in KPK, case of Akhuwat.
2014	Firend A. et al	Bartlestt’s test	Banking, insurance, and telecommunications industry.	Malaysia	The SQ, trust & perceived value are taken as antecedents of clients loyalty
2014	Munawar. M. Khan, Mariam Fasih	Regression	Banking	Pakistan	Service quality has positively link to customer satisfaction and customer loyalty.
2015	Kamal & Jalel	Cross sectional & Panel data approach	Microfinance Institutions	Developing Countries	Higher MFI gross loans per capita in portfolio results to reduce poverty
2015	Noradiva Hamzah et al	Survey approach and questionnaire based, correlation	Islamic Banking	Malaysia	There is a positive relationship between CS and SQ.

2015

Samer, Majid, Rizal,

Sarah

Regression, Chi

Square

AIM, MFI, Islamic

MFI

Malaysia

Poverty reduction through MF as AIM case.

2015

Yusuf Alhaji

Hashim, Patience

Gaiya Dodo

Logistic Regression

Microfinance Banks

Nigeria

The extension of microcredit to larger poor households to mitigate the menace of poverty in Kano State.

Chapter 3 Microfinance and Microcredit Overview

3.1 Global Overview

At that time when richest countries of the world were getting down by piling up loans and clients defaulted just due to not paying back their loans. At this point to lend the same poor world, looked hardly wise. But these small loans get popularity. Microfinance had existed long ago for decades, but it had only got global recognition later. It got attention on commercial basis later on different activities basis. That activities could offer real opportunities for micro entrepreneurs. That’s how it is now globally recognized by M. Yunus. He was the founder of Grameen Bank in 1983 and rewarded with Nobel Prize in 2006. He made struggle to increase accessibility of finance to the poor people of the world. These struggles were supported by multilateral development agencies. They announced internationally in 2005, as year of microcredit. Due to it, this microcredit was not remain just linked to bank, it expanded to NGO level too.

10 –15 % is the average growth rate which the experts interviewed by Responsability project for the global microfinance market (Etzensperger 2015). The NGOs were working and devised the potentials and challenges of microfinance (Moraise, Ahmed 2010). Their major focus was the analysis of institutional and organizational factors by using microfinance to rehabilitate the natives of conflicted areas. Microfinance providers played an important role to transfer money from one to another client who were more affected by disaster (Nagarajan 1998). As stated in report of responsibility investment, data were gathered from 77 countries to get forecasted portfolio growth for 2015 on the basis of data of 2014 (Etzensperger 2015). According to it, Asia-Pacific was having high level of growth. That showed the potency to increase in GDP and the optimal utilization of microcredits provided by MFIs in these countries. Therefore number of MFIs were estimated to increase.

Table: 3.1 Forecasted Portfolio of Growth of Global MFI Regions 2015

Forecast Portfolio Growth 2015

South America	10-15%
Central America	10-15%
Sub Saharan Africa	10-15%
Middle East & North Africa (MENA)	15%
Central Asia	10-15%
Eastern Europe	5-10%
Asia-Pacific	30-35%

*source: ResponsAbility Investments AG, www.responsAbility.com.

Asia-Pacific has forecasted high market region. High percentage of Asia-Pacific is due to south Asian countries because they are developing and has high level of poverty as compared to other countries and market regions. They have threat to economies and unstable economies. For that reason, reported that the countries having conflicts, political threats, unstable economies and need to rehabilitate the natives, required microfinance organizations to work (Nagarajan 1999).

Even then, if data from 2009 is taken, it showed that South Asian Region had highest score of institutional development in case of microfinance. So on the whole, this region has lots of growth opportunities for MFIs.

Table: 3.2 Institutional Development

Status	Region	Score
1	South Asia	46.7
2	Latin America/ Caribbean	42.9
3	All Asia	34.0
4	ALL countries	33.8
5	Sub Saharan Africa	26.4
6	Eastern Europe/Central Asia	26.2
7	East Asia	25.0
8	Middle East/ North Africa	16.7

*source: Global report on the microfinance business environment, www.eiu.com/ GlobalMicroscope2009.

3.2 Asia-Pacific and South Asian Overview

As the world is growing fast in communication and it has turned its focus to the situation in south Asia. The responsible reporting has been done in 2014 as situation in India and Bangladesh has begun to emerge in the microfinance sector. As it is depicted in table 3.3 and graph 1.1, 1.2 and 1.3 according to number of MFI of South Asia 2014, their gross loans portfolios at that time and active borrower in South Asia 2014, in respected form.

	No. of MFIs		Active Borrowers	Gross Loan Portfolio
Afghanistan		5	106,678	93,108,185
Bangladesh		34	17,284,832	5,176,889,726
Bhutan		1	–	161,710,448
India		93	37,837,817	7,260,789,423
Nepal		13	897,179	557,079,493
Pakistan		18	1,46,689	463,714,960
Sri Lanka		2	120,581	23,605,964
Total			million	13.8 billion

Table: 3.3 MFI countries in South Asia (2014)

*source: http://www.mixmarket.org/mfi/region/South%20Asia

To figure out the country to be research on, percentage of average number of MFIs from these 7 countries are calculated approximately 14%. So the closer to this percentage average, Pakistan is picked because it is closer to it. It is also at third position from top in south Asian MFIs as based on number of MFIs. There are other relevant statistics, likewise, gross loan portfolio and active borrowers in these above mentioned countries. This gives a glance that which country stands where. India comes at first and Bangladesh at second. While Pakistan comes at third.

This situation can change for gross loan portfolio and active borrowers due to the market share captured by these MFIs. Because it links to their performance and capacity.

Graph: 1.1 Pie chart based on number of MFI in in South Asia 2014

*source: http://www.mixmarket.org/mfi/region/South%20Asia

Graph: 1.2 Pie chart based on gross portfolio loans of MFI in South Asia 2014

*source: http://www.mixmarket.org/mfi/region/South%20Asia

Graph: 1.3 Chart based on active borrower of MFI in South Asia 2014

*source: http://www.mixmarket.org/mfi/region/South%20Asia

3.3 Microcredit in Pakistan

Pakistan microfinance network report of 2014 has explained that the Government of Pakistan had introduced microcredit program in 2014 without interest factor to reduce poverty and try to lower unemployment. In this plan 3.5 billion rupees were dedicated for the poor and indigent population in the country. When this information prevailed, stakeholders of microfinance industry were abruptly disturbed as they showed apprehensiveness toward this program as it had to cut down the market share of conventional microfinance. To safeguard the concern of conventional microfinances, this program had decide to go by the national apex, Pakistani poverty alleviation fund and loans would be given to poor people who lie under 40 on the poverty scorecard. Union councils had got the hold of this program through which conventional microfinance institutions were not be able to interfere. There are more than 24 MFPs have partnered with Pakistani poverty alleviation fund. It was expected to add 1,000,000 active borrowers in next three years. It was nut shelled and concluded as the majority of the respondents in that scheme, got the loan for their existing business expansion. 80% of them utilized the loan for intended purpose (Rafay 2014).

3.3.1 Conventional Microcredit in Pakistan

Poverty is a growing problem of Pakistan. Conventional microcredit was considered as solution to remove poverty. It was a plan to assist in improving income generation level to fulfil the needs of poor. It could help them to make their own small business. It was planned to support self-employment for both genders to bring economic change. But people with low salary, did not get approach to banks or any other formal financial institutions. But the observations has told the middle class of the society availed them. Later on they were consider the major clients of conventional microcredit. The microfinance sector with targeted market, has huge borrowers group and government has set the outreach goals. But this is not as simple as it seen. The objective of conventional microcredit is quite simple.it is to make a change systematically by interest fusion in financial systems worldwide. The aim of conventional microcredit and the CMIs, is to multiply the interest on loans and make people to tangle in it for long run instead of benefiting. CMIs were considered to promote the microcredits which would also increase the chances of employments and entrepreneurship activities. This would gave empowerment to people. Through indirect effects of conventional microcredits in microfinance on the poor people can be seen by reducing poverty and improving living standards.

As the CMIs has planned, they do not get that mark to satisfy and show optimal results. But fewer are seen. There is positive effect of microfinance to reduce poverty by generating income, lowering expenses, promoting and supporting the health and living standards of households (Ghaliba, Malki & Imai 2014). Bangladeshi microfinance have reduced poverty and met the expenses regarding household for basic food or nonfood needs (Khandker 2005). While there is positive effect and role of microfinance towards the rural clients in Uganda (Morris & Barnes 2005).

On the basis of the compilation of data, which was gathered from micro financial institutions of India, Guatemala and Ghana. It was suggested the role of microfinance was effecting positively on clients’ businesses and households (Mcintosh et al 2008). Microfinance has proven more positive in the urban areas of the India by showing positive effects in client’s income (Imai et al 2010). People who use microfinance, has more positive effects as compared to those who do not avail this facility to overcome their poverty (Morduch & Graduate 2002). So he did analysis on client and non-client of MFI.

But in fact, poor people are not capable to overcome the stated terms while people from the middle class also not avail conventional microcredit due to interest factor. But the reason of slow growth, it doesn’t target the entire poor group. The poor people don’t be able to get these loans due to interest payments or the procedures required to follow. The CMIs selected for this study are discuss before in table. 3.5.

Client satisfaction is the representation of modern approach of quality in organizations. It serves as a development role to make customer-focused management and culture. The feedback about preference of clients and expectations of the clients, are ways to measure client’s satisfaction. For CMI sector, majorly focus on their service quality to convince their clients to deal with them in long run. But how long, no one have idea about it in CMIs.

The interest and payments terms, make clients drag towards thoughts for alternatives.

3.3.2 Islamic Microcredit in Pakistan

Even though there are various beneficial concepts of Islamic microcredit but still, it attracts less attention from many countries to implement. The growth of Islamic microcredit in Pakistan or other Asian countries are still in infancy stage because there is a limitation of microcredit services or products provided by commercial banks such as Bai al Innah. Some Islamic banks offer loans based on Qard-hassan (interest-free) but still they imposes a certain percent service charge on loan offered as their fee of process.

The first conference on national level about Islamic microfinance of Pakistan was held in 2011, on Poverty alleviation through Islamic microfinance. It was relating to microcredit and micro loans, on 29 January at Lahore chamber of commerce & industry. It was detailed the success of this method and networking effectively to meet the challenges in sector. There were prominent organizations present in that conference i.e. Akhuwat, AHAN, Alhudda, CWCD, CIBE, Naymat Islamic Microfinance, Islamic relief, SMEDA, Kashf, Mojaz Foundation, Manzil Program, Islamic Microfinance Network International, Pak

Qatar Family Takafal, Lahore Chamber of Commerce and Industry, SAARC Chamber of Commerce and Industry, Federation of Pakistan chambers of commerce and Industry and Women Chamber of Commerce & Industry.

In the previous decade, it has tremendous growth and transformation of society in Pakistan’s Islamic microcredit sector, starting from 60,000 clients in 2000 to over 400,000 clients in 2014 while overall there are 2 million clients of Islamic microcredit in the world. Islamic microcredit provider are 6 including Akhuwat, Kashf, Asasah, Deep, Wasil and Naymet foundation while Buksh foundation, Community Support Concern (CSC), DAMEN and RCDS are convention microfinance provider in Pakistan till 2015. Still Pakistan has 56% adult population totally excluded from the penetration level and while 32% has served informally. The overall MFIs in Pakistan in 2015 has USD 788 million loans disbursed to 3.5 million borrowers. While in the end of 2015, 3.7 million borrows are recorded in combine to Islamic and conventional microfinance sector with 915 loans disbursed.

In a meeting of the federal cabinet which was held on September 2015, a participant told that the Prime Minister was concerned about to reduce the cost of loans, a credit guarantee scheme for small and marginalized farmers. That were already in place and its scope was being extended to benefit 300,000 households with small landholdings. So this will be good signal for conventional microfinance institutions.

While the overall top Islamic and conventional foundations (NGO), leading in Lahore, Punjab are as followed. These have loan disbursed 15% of value. For the research purpose I choose the foundations that have more the 10,000,000 USD value of loans disbursed. This data is taken by the end of 31 December 2015.

Table: 3.4 IMIs 2015

No.	IMFIs	Loans (USD)	Borrowers
1	Akhuwat	54,940,813	469,017
2	Kashf foundation	44,480,269	249,251
	Total	99,421,082	718,268

Source: http://www.mixmarket.org/mfi/country/Pakistan

TABLE: 3.5 CMIs 2015

No.	CMFIs	Loans (USD)	Borrowers
1	DAMEN	10,920,704	44,814
2	RCDS	11,410,240	63,620
	Total	22,330,944	108,434

Source: http://www.mixmarket.org/mfi/country/Pakistan

(Dhumale et al 1999), (Zafor. M 2007), (Ashraf. A 2007), (Farook 2007), (Chowdry. S 2006), (Goud 2007), (Ferro 2005) and Associated Press of Pakistan in 2000, they had highlighted the necessity of Islamic microcredits especially as they stated different similarities likewise sharing of the risk, egalitarian (equality), innovate with ideas and competitive. There are many people who consider interest as forbidden element which is called Riba in Islam.

Products and services of Islamic are perceived of good quality and having high value. People consider it as part of their worship to use them. The Prophet said whoever finds himself at nightfall tired from his work, God will forgive his sins. It is also reported by Abu Hurairah said that the Prophet said charity (sadaqah) is due upon every joint of a person on every day that the sun rises. As reported by Bukhari Administering justice between two people is an act of charity and helping a man concerning his riding beast by helping him on to it or lifting his luggage on to it, is an act of charity, a good word is charity, and every step which you take to prayer is charity, and removing that which is harmful from the road is charity (Abdul Hameed, 2001). The Prophet also said Allah loves to see one’s job done at the level of itqan (Sabeq 1988).

The arranging and disposing of things artistically and scientifically, mean itqan. This is done to obtain optimally perfect results to do the things of high quality by wisdom. So a Muslim must support, help and make happy others. He/she give surety to do not give pain to the mankind.

Secondly, service quality in microcredit in Islamic microfinance has become important because it has relationship to costs (Crosby 1979). The factor of profitability also tangled in the service quality (Buzzell & Gale 1987). Organizations can perform better with better servies provided (Rust & Zahorik 1993). High service quality concerns of the organization, leads to better profitability of organization (Zahorik & Rust 1992). Service quality links to client satisfaction (Bolton & Drew 1991). There is positive relationship between client satisfaction and quality of the service (Boulding et al. 1993). Service quality helps in retaining clients on long run basis (Reichheld & Sasser 1990) and positive word of mouth. Service quality was pick to market and make performance better of the banking sector (Kwon & Lee 1994). There is significant association of performance and service quality (Wong & Perry 1991). Islamic finance is defined as a financial relationship involving selfemployment or investment in entrepreneurship which is subject to moral prohibitions (Jobst 2007).

Islamic bank were concerned about the quality of service (service quality) (Othman and Owen 2001). He stated further 2 reasons. Islamic bank products and services are considered as having high religious value with quality because depends on religion (Islam) by the clients, where Shari’ah in banks believed as worship. Secondly, the adoption of service quality in the Islamic bank, is more important because financial practices, clients satisfaction and retaining them. So here we are relying on information on different institutions like NGOs in Pakistan who are offering Islamic microcredit in Pakistan successfully.

Islam prohibits speculations in trade, interest earning, gambling, sinful activities and making money out of money. So according to Islamic laws and rules, people should need to trade based on real products or services including the profit and loss property. They have to share profit and they have to share loss in the business too. All the mechanism is based on ethical practices. There is proper wealth distribution so the right one should get his or her right share. This would create strong and long term impact on poverty alleviation by Hayat (2009). Islamic microcredit is based on no interest rule. It benefits the poor better than the conventional microcredit. Poor people avail the microcredits and improve their economic level (Simanowitz 2004). This empowered poor (Dichter 2006) but on the other side it was a social liability (Awojobi & Bein (2011). It is not only to empower but reduce global poverty (Daley-Harris 2007). Islamic microfinance stands central part to reduce roles of financial intermediaries demanded by Shari’ah (Mansori. S. et al 2015). In past, few steps had been taken to make certain steps to reduce poverty in Muslim countries. She also provided the Islamic to improve the life of poor. Further it is required to enhance social activities and living standard of society. Islamic microfinance is an important to alleviate the poverty from society by right movement of funds to develop micro entrepreneur projects (Zuraidah et al 2014)

Credit supply has two approaches (Shetty 2008). One of them was the minimalist through which micro entrepreneurship flourished to streamline the consumption or income generation by lowering unemployment. While the other one was the maximalist. It included non-financial services. So the non-economic benefits also help in eradication of the poverty (Shetty 2008). But the main point come in the mind, the poverty is the only indication or it is the cause. So the broaden view is by usage of Islamic microcredit, empowerment to the talented group is possible. It should be used for more productive works and proliferating its effects to increase the standard of living of the entrepreneurs and ultimately the society.

Through microfinance, poor people assist in fulfilling needs, giving empowerment and saving against vulnerability (UNCDF 2004). These are purely based on gender equality. In fact it is empowering women too. The lending process in groups are more secured (Dasuki 2006) while Ibn Khaldun suggested Asabiyah. This was combining or unifying the force. This is considered as new concept of social capital.

The microfinance institutions (MFI) or banks are now working on the importance of the client satisfaction. Because of its importance, they need to focus on the quality of their services. The perception of Shari’ah remain a central interfering point now these days. Different research as discuss above, clients who experience the microcredit services want to retain as satisfied client, because they perceived well. Their perception is starting to meet their expectation. When they are met, they become satisfied for that certain service.

This is one scenario to boost the market share and get more attentions of clients which later on attract towards them. Service quality is an obligatory to these MFIs. It is also needed to match with client satisfaction.

Chapter 4 Methodology

4.1 Research methodology

When you are talking about the research methodology then first point come what is methodology in mind. It is a frame of method, procedures, working concepts employed by a discipline” to be carried (Asutay 2006b). On the basis of it research methodology is the study of methods and principles and their applications in a given field of academic inquiry” (Asutay 2006b). There are two approaches in research, qualitative and quantitative research.

In this research we have use quantitative approach based on statistical test which are conduct on the responses gathered on questionnaires. This study is intended to focus on quantitative research as service quality, Shari’ah perception and client satisfaction in case of Islamic and conventional microcredit. I have used quantitative statistical analysis. Using linear regression and interaction test for testing moderating effect. It is primary study. The study has got the observations from the respondents who are clients of IMIs and CMIs by distributing questionnaires to them respectively. The questionnaire have some mix question like binary form or open questions majorly related to demographics and closed questions based on 5-point Likert-type scales for the calculation of variables effect. Next, the process followed by creating and reliability checking each variable described. Islamic finance is a wide and deep field with range of different instruments, definitions, exegeses, explanation and a qualitative analysis.

That would give surety of understanding the subject in depth. It is comparatively new phenomenon in practice and it is applied in Pakistan in fewer decades in addition of constraints of time and money. Furthermore, this study is more concerned with the progression of Islamic microcredit industry within Islamic microfinance in Pakistan in comparison to conventional one. Islamic MFP in Pakistan, have started to give awareness about Islamic microfinance to people and their current clients. This will further attract new people to become their clients, for their struggle to eliminate the financial inequality among the poor. While the conventional MFP in Pakistan are still not capable to attain this objective.

4.1.1 Target population

Target population of Islamic microfinance from different Islamic microfinance institutions of Pakistan i.e. Akhuwat and Kashaf fundation. We will target users of Islamic microcredit from these foundations located in Lahore. While for conventional microcredit, we will go for DAMEN and RCDS. The major geographic region of Punjab, Pakistan is selected and in Punjab majorly we will focus on Lahore city because mostly head offices of these foundations are located in Lahore. The total population for Islamic microcredit which I will going to target is 718,268 while in conventional microcredit, it will 108,434. These are from foundation or NGOs, not from banks. The targeted audience will also from that foundation who have more than USD.10, 000, 000 loan disbursed value. The samples will be selected by convenient sampling approach

4.1.2 Sample size and technique

Sample size is 578 (289 CMI and 289 IMI) respondents for each sub-sector. This range is arbitrarily and conveniently selection depending on the availability issue of respondents and ease to get response from them. While my respondents fall on 289, so concrete sample size is 289. In this research we try to work on same number of respondents while this scenario depicts 4% respondent clients from population of Islamic microcredit clients and 26 % clients as respondents from the population of the conventional microcredit side.

4.1.3 Research design

The research design in a form of a program that assist to investigate the procedure of collection, analyze and interpret observations. It is a reasonable and logical model to proof conclusion relating to normal relationships of different variables which are under the process of investigation (Asutay 2006c).

This research is divided into following parts. The first it relates to an empirical study of microcredit into microfinance, their dilemmas and problems, as well as the success of microcredit within Pakistan, in the presence of political instability. The second relates to the service quality I standpoint with relevant to client satisfaction which is also based on the fulfilment of the loan needs and there optimal disbursement and use. The resulting effect is based on the individual and moderating effect of Shari’ah perception in microcredit. The third part of this study is based on 4 MFIs from list of MFPs in Pakistan, i.e. Akhuwat, Kashf as IMIs and RCDS, DAMEN as conventional CMIs.

4.1.4 Research strategy

Research strategy is defined as the approach to the study of question (Asutay 2006c). Bell delves linked the ideas to be researched along with the techniques and tools. The ideas are subjected to the way we use tools accordingly (Asutay 2006c).

This research work is analyzing the existing knowledge and evaluate the practices of selected MFIs. Within this we try to get the moderation effect of Shari’ah perception that in addition of service quality enhance the client satisfaction. This will be profitable to clients as well as to the selected MFIs. In later stage we will compare the results of Islamic microcredit and conventional microcredit. In result of it, Islamic MFIs can get more market share and can have a chance to become leader in the MFI’s world.

4.1.5 Research method

The research methods are the specific research techniques (Asutay 2006a) while Murray and Lawrence are consider it as trading tools (Asutay 2006a). Qualitative methods “test explicit explanations of social phenomena using textual or observational data” (Asutay 2006d).

A theoretical framework is formed and the questionnaire based observations are studied in-depth and formulate an increased understanding in IMIs and CMIs. It’s a unique methodology. This is where statistical data adequate the purpose due to quantitative approach. David C. Howell (1988) statistical concept is used as he mentioned in his book of statistical methods for psychology.

4.1.5.1 Questionnaire

The Questionnaire is based on mix question like binary form or open questions for demographics in which name, address, email are open and optional while the gender was binary form. The organization, education and age are open ended question. The closed questions based on 5-point Likert-type scales for the calculation of variables effect.

There are first 8 questions are based on demographics and foundation type. While question no. 9 to 11 are used for interest perception which gives general view about interest based on interest free concept and benefits for wellbeing or not. I take them for the secondary factor for Shari’ah perception. From question no. 12 to 27 are representing to calculate service quality and from 28 to 31 for primary factor of Shari’ah perception. While client satisfaction is measured by question 32 to 35. Questionnaire used to collect data included extensive documented reviews to comprehend its methodology and financial sustainability. This study is also based on information from secondary sources which includes research articles, reports, meetings and internet. These are critically analyzed to elaborate main concerns with microcredit, microfinance status in Pakistan in both perspectives.

4.1.5.2 SPSS Process

The questions from questionnaire are entered on the SPSS while the variable view is set according to questions type. Later on the questions relating to each variable e.g. service quality, Shari’ah perception and client satisfaction are dig out from their relevant questions. We check the correlation independent basis for model 1 by SQ (service quality), SP (Shari’ah perception) and CS (client satisfaction). Then later on we check moderation effect by interaction test for model 2.

For interaction test, I calculate the centered value for SQ (service quality) which is come out from the SQ minus SQ average. It creates SQ centered value. Likewise I get SP (Shari’ah perception) centered value. To get the interaction or moderation value, I calculate the product of SQ centered* SP centered. This is moderation effect resulted in SQ-SP centered. So for checking moderation we run the SPSS to analyze their correlation and regression on the basis of moderating effect of SQ-SP centered value, SQ and SP. Our main concern revolve around the correlations, regression, F-test, T value and the significance level of the test and variables.

4.2 Limitation and difficulties

The field study on the impact of Islamic and conventional microcredit on clients of Akhuwat, Kashf, RCDS and DAMEN would be useful and give better support to this study, however, time, confidentiality and availability of funds are the constraint for this study. In addition, the diverse domestic location of offices of Islamic and conventional MFI in Pakistan, created hindrance in pace. Political un-stability and unusual holidays interrupt the pace of research work.

Literature, practical cases and examples relating to Islamic microcredit is very limited, therefore, very few assumptions are based on the individual areas of microcredit in microfinance and Islamic finance are made. It was difficult to communicate to individual client within respected period of time by filling questionnaire and interviewing as well, to gather more information as much as possible from them. So I tried to reach every possible client respondent for my questionnaire and in addition I interviewed them on basis of questions in the questionnaire. For that reason, we can’t be able to incorporate more research areas for example, interest rates, performance indicators and switching cost.

Chapter 5 Result & Discussion

This research work examines the relationship between service quality and client satisfaction under the moderating effect of Shari’ah perception. This study aims to analyze the influence of this relationship and the selected variables in microcredit of MFIs in Pakistan by a comparing conventional and Islamic microcredit offered by MFIs in Pakistan. It is intended to test the formulated hypotheses based on literature review in Pakistan perspective.

5.1 KMO & Bartlett’s test and Reliability/ Cronbach’s α

Normally KMO value resides from 0 to 1. The closer to 1 is consider much better while it should be at least greater than 0.5 to be acceptable. In this research, this test is applied to get results for the sample adequacy and significance. It shows that both CMI and IMI are significant and reside in acceptance region. By 0.616 for CMI and 0.744 for IMI. While

Bartlett’s test of sphericity also lies above 0.05, showing the 95 percent level of significance as given in table 5.1.

Table: 5.1 KMO and Bartlett’s Test CMI IMI

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.		.616	.744
Bartlett’s Test of Sphericity	Approx. ChiSquare	9544.079	4810.909
	df	351	351
	Sig.	0.000	0.000

To check the reliability of the variables according to related items present in questionnaire, Cronbach’s alpha is calculated. This shows the measure of internal consistency. That is, how closely related a set of items are as a group. It is used to measure reliability. In case of CMI, service quality has α of 0.711 while Shari’ah perception has α of 0.534. Client satisfaction has α of 0.927. In case of IMI, service quality has α of 0.606 while Shari’ah perception has α of 0.570. Client satisfaction has α of 0.760. The overall α for CMI is 0.795 and IMI is 0.674 as depicted in table 5.2.

Table: 5.2 Cronbach α

Service Quality	Items in each case	CMI	IMI
Service Quality	16	0.711	0.606
Shari’ah Perception	7	0.534	0.570
Client Satisfaction	4	0.927	0.760
Overall Cronbach α	27	0.795	0.674

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

5.2 Descriptive Statistics Comparison (CMI and IMI)

The total sample size is 578. The total respondents for the conventional microfinance sector dealing with conventional microcredit are 289. These are the user of conventional microcredit from RCDS and DAMEN. The number of male respondents are greater than female respondents. The education percentage for 289, most of them are middle to matric pass. While the second most are intermediate or graduation passed (demographics for CMIs are attached in appendix IV).

The total respondents for the Islamic microfinance sector dealing with Islamic microcredit are 289. These are the user of Islamic microcredit from Akhuwat and Kashf foundation. The number of male respondents are greater than female respondents. The education percentage for 289, most of them are illiterate. While the second most are primary passed (demographics for IMIs are attached in appendix V).

In this research, I use Likert 5 scale, so here are the descriptive statistics for comparison from conventional and Islamic microcredit clients in Lahore, Pakistan as represents in table

5.3 and 5.4, comprising of the comparison of conventional and Islamic sides.

Table: 5.3 Descriptive Statistics (Gender & Age)

Gender	Male	CMI		IMI
		Frequency	%	Frequency	%
		192	66.4	162	56.1
	Female	97	33.6	127	43.9
Age	Total	289	100	289	100
Age	18-20	22	7.6	24	8.3
	21-23	16	5.5	31	10.7
	24-26	23	8.0	12	4.2
	27-29	55	19.0	35	12.1
	30-32	32	11.1	35	12.1
	33-35	36	12.5	35	12.1
	36-38	30	10.4	14	4.8
	39-41	26	9.0	44	15.2
	42-44	20	6.9	18	6.2
	45-47	24	8.3	21	7.3
	48-50	5	1.7	13	4.5
	51-53	0	0	7	2.4
	Total	289	100	289	100

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

Table 5.4 Descriptive Statistics (Income & Education)

Income	<10000	CMI		IMI
		frequency	%	frequency	%
		26	9.0	38	13.1
	(10001-20000)	108	37.4	151	52.2
	(20001-30000)	91	31.5	91	31.5
	(30001-40000)	55	19.0	9	3.1
	(40001-50000)	9	3.1	0	0.0
Education	Total	289	100	289	100
Education	0	65	22.5	112	38.8
	(1-5)	59	20.4	91	31.5
	(6-10)	90	31.1	74	25.6
	(11-14)	67	23.2	11	3.8
	(15-18)	8	2.8	1	0.3
	Total	289	100	289	100

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

5.3 Correlations Comparison (CMI and IMI)

Correlation is the direction of the relationship between two variables about the movement of direction. It moves from 1 to -1. 1 is highly correlated with positive direction or same direction and -1 is highly correlated in opposite direction. While the 0 is no correlation or indifferent from the motion. There are the correlation between the SQ, SP and CS for model 1 and these all are significant and positive correlated to CS. While for model 2, these are also significant.

For CMI in model 1 response, SQ is 0.514 and SP is 0.270 for CS. While SQ and SP themselves positively correlated to each other with 0.220. So it means if service quality (SQ) changes then the client satisfaction will also change positively with effect of 0.514 uphill on the graph. While Shari’ah perception (SP) changes then the client satisfaction will also change positively with 0.270 uphill. When SP changes then SQ will also change positively with effect of 0.220 uphill as given in table 5.5. So higher the service quality, higher the client satisfaction. Higher the Shari’ah perception, higher the client satisfaction.

For IMI- Model 1, as SQ is 0.528 and SP is 0.186 for CS. While SQ and SP themselves positively correlated to each other with 0.128 as shown table 5.5. So it means if service quality (SQ) changes then the client satisfaction will also change positively with effect of

0.528 uphill on the graph. While Shari’ah perception (SP) changes then the client’s satisfaction will also change positively with 0.186 uphill. When SP changes then SQ will also change positively with effect of 0.128 uphill. It also shows that higher the service quality, higher the client satisfaction. Higher the Shari’ah perception, higher the client satisfaction. This comparison for model 1, conventional and Islamic microcredit clients, is given in table 5.5. Correlation is significant at the 0.01 level (2-tailed), while N= 289 for CMI and N=289 for IMI for model 1.

Table: 5.5 Correlation for variables

Service Quality		CMI-MODEL-1		IMI-MODEL-1
	Service Quality	Shari’ah Client Perception Satisfaction	Service Quality	*Shari’ah* Perception	Client Satisfaction
	1		1
Shari’ah Perception	.220^**	1	0.128^**	1
Client Satisfaction	.514^**	.270^** 1	0.528^**	0.186^**	1

**. Correlation is significant at the 0.01 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed).

*. N=289 *. N=289

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction

While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

Table: 5.6 Correlation for Moderation

CMI-MODEL2 IMI-MODEL2

SQ- CENTERED	SQ- CENTERED	SP- CENTERED	SQ-SP- CENTERED	Client Satisfaction	SQ- CENTERED	SP- CENTERED	SQ-SP- CENTERED	Client Satisfaction
SQ- CENTERED	1				1
SP- CENTERED	.220^**	1			0.128^*	1
SQ-SP- CENTERED	-.328^**	-.120^*	1		-0.399^*	-0.145^*	1
Client Satisfaction	.514^**	.270^**	-.297^**	1	0.528^*	0.186^*	-0.127^*	1

*Correlation is significant at the 0.05 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

** Correlation is significant at the 0.01 level (2-tailed). **. N=289

*** N=289

SQ Centered= Service quality centered.

SP Centered = Shari’ah perception centered

SQ-SP-CENTERED shows the moderation effect of service quality and Shari’ah perception

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction CMI= Conventional Microfinance Institutions while IMI= Islamic Microfinance Institutions.

We have correlation between the respected variables (raw and generated). The SQ SP product, SQ centered, SP centered and SQ-SP centered are generated on SPSS for the calculation of moderation effect by using interaction method. Interaction test is formally used to get effect of the moderator on the relationship between the independent and the dependent, so I use this test for model 2 for conventional microcredit and Islamic microcredit by using SQ, SP and SQ-SP-centered. Whether it will affect positively or negatively but it is effecting in certain way. All the variables are significant.

SQ-SP product create multicollinearity so this issue is solved by using centered values. For calculating this, we use SQ, SP and the SQ SP centered to get interaction effect on CS which is client satisfaction.

For CMI- Model 2, SQ centered is correlated with 0.514 and SP centered is correlated with 0.270 with CS. while SQ-SP centered is correlated with -0.297 to CS as given in table 5.6. For IMI-Model 2, SQ centered is correlated with 0.528 and SP centered is correlated with 0.186 to CS. while SQ-SP centered is correlated with -0.127 to CS as given in table 5.6. SQ-SP centered is correlated with -0.399 to SQ centered and -0.145 to SP centered.

(*) it shows that correlation is significant at the 0.05 level (2-tailed) while (**) correlation is significant at the 0.01 level (2-tailed). CMI has N= 289 while IMI has N=289. So the total sample size is 578 as represented in table 5.6.

5.4 Model Summary (Comparison of CMI and IMI)

The positive correlation between service quality, Shari’ah perception and client satisfaction again for conventional microcredit, have enhancing nature to increase client satisfaction individually and effectively in model 1. We run the regression for the Model:

1 in theoretical framework. That model: 1 is significant.

For CMI-model 1, it has R value of 0.539 with the R square of 0.290. This tells the model is regressed on line about the 29% out of approximate 54%. So there are more chance of risk associated and more chances of errors as its standard error is 1.306. It has R square change value of 0.290 while F change value is 58.485.It has significance F change at 0.000 as given in table 5.7 while extensively in table AVI-1 (Appendix-VI). While Durbin Watson value is 1.338.

For CMI-Model 2, the regression in theoretical framework is run on SPSS. That model: 2 is significant and it has R value of 0.554 which means 55.4% with the R square of 0.307 or 30.7%. This tells the model is regressed on line about the 30.7% out of 55.4%. So there are more chance of risk associated and more chances of errors as its standard error is 1.29 in table 5.7 and extensively in table AVI-6 (Appendix-VI). The F value is 42.013 and it is statistically significant in table 5.7 and extensively in table AVI-7 (Appendix-VI). It has R square change value of 0.307 while F change value is 42.013.It has significance F change at 0.000. While Durbin Watson value is 1.321.

For IMI- Model1, here are the regression for the Model: 1 in theoretical framework. That model: 1 is significant and it has R value of 0.542 with the R square of 0.293. This tells the model is regressed on line about the 29.3% out of 54.2%, approximately. So there are more chance of risk associated and more chances of errors as its standard error is 0.67 in table 5.7 and extensively in table AVI-12 (Appendix-VI). It has R square change value of 0.293 while F change value is 59.404. It has significance F change at 0.000 as given. While Durbin Watson value is 1.860. While R is the value which is actually showing the linear line on which the observations are fell. The closer the line, the better the result come out. So it determines the strength of the relationship between the dependent and independent variables.

While R-square give an estimate of the strength of the relationship between your model and the response variables. This also not necessary that higher R-square is always good and lower is always bad. In fact the F-test give the actual significance level and acceptance of rejection of model. In table 5.7 and extensively in table AVI-13 (Appendix-VI). The F value is 59.404 and it is statistically significant. It has able to reject null hypotheses.

IMI-Model: 2 is significant and it has R value of 0.552 which means 55.2% with the R square of 0.304 or 30.4% approximately. This tells the model is regressed on line about the 30.4% out of 55.2%. So there are more chance of risk associated and more chances of errors as its standard error is 0.66 in table 5.7 and extensively stated in table AVI-17 (Appendix-VI). It has R square change value of 0.304 while F change value is 41.555. It has significance F change at 0.000. While Durbin Watson value is 1.867.

The F value is 41.555 and it is statistically significant in table 5.7 and extensively stated in table AVI-18 (Appendix-VI).

Table: 5.7 Model Summary (Comparison of CMI and IMI)

R	CMI-MODEL1	CMI-MODEL2	IMI-MODEL1	IMI-MODEL2
R	0.539	0.554	0.542	0.552
R-Square	0.29	0.307	0.293	0.304
F	58.485	42.013	59.404	41.555
Sig. F change	0.000	0.000	0.000	0.000
Std.Error	1.30686	1.29397	0.67306	0.66906
R-Square Change	0.29	0.307	0.293	0.304
F-Change	58.485	42.013	59.404	41.555
Durbin Watson	1.338	1.321	1.860	1.867

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction

While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

5.5 Comparison of significance level (CMI and IMI)

In this research study, there are three parameters including service quality as SQ, Shari’ah perception as SP and client satisfaction as CS for model 1. While to check the moderation of SP, I use SQ- centered, SP- centered, SQ-SP- centered and CS to get results for model 2 by applying interaction test.

For, CMI-Model 1, the independent variable of SQ and SP are significant and with beta of 0.478 and 0.168 respectively. The T-value is also greater so it is in form of acceptance as in table 5.8. The coefficient for service quality (9.357) is significantly different from 0 because its p-value is 0.000, which is smaller than 0.05. The coefficient for Shari’ah perception (3.234) is significantly different from 0 because its p-value is 0.001, which is also larger than 0.05. While 0 is mean µ. Intercept is also significant because it is also lower than 0.05.

For IMI Model 1, the independent variable of SQ and SP are significant and with beta of 0.513 and 0.121 respectively. T-value is also greater so it is in form of acceptance as in table 5.8. The coefficient for service quality (10.236) is significantly different from 0 because its p-value is 0.000, which is smaller than 0.05. The coefficient for Shari’ah perception (2.406) is significantly different from 0 because its p-value is 0.017, which is also larger than 0.05. Intercept is also significant because it is also lower than 0.05.

While for CMI-Model 2, the beta in table 5.9 is 0.435 for SQ centered, 0.158 for SP centered and -0.136 for SQ SP centered. This is standardized beta values. The coefficient for SQ centered (8.170) is significantly different from 0 because its p-value is 0.000, which is smaller than 0.05. The coefficient for SP centered (3.127) is significantly different from 0 because its p-value is 0.002, which is also larger than 0.05. While the SP-SQ-Centered (2.594) is significantly different from 0 because its p-value is 0.010, which is also larger than 0.05. The intercept is also significant because it also less than 0.05. This negative relationship of interaction value shows, that service quality influences client satisfaction under the interaction effect of Shari’ah perception which is moderator. This term shows

that as Shari’ah perception of client enhances, the surrounding puts less pressure to adopt other alternative, Islamic microcredits. So on the basis of this negative effect of moderation, clients on conventional microfinance, have more tendency to move to Islamic microcredits.

For IMI Model 2, the standardize beta for SQ centered is 0.557, SP centered is 0.131 and SQ-SP centered is 0.114 as it is depicted in table 5.9. The coefficient for SQ centered (10.308) is significantly different from 0 because its p-value is 0.000, which is smaller than 0.05. The coefficient for SP centered (2.625) is significantly different from 0 because its p-value is 0.009, which is also larger than 0.05. While the SP-SQ-Centered (2.105) is significantly different from 0 because its p-value is 0.036, which is also larger than 0.05. The intercept is also significant because it also less than 0.05. The detail calculations are given in appendix-VI.

While the over-all comparison between the parameters of CMI and IMI for model 1 and model 2 is given in table 5.10. The unstandardized and the standardized error are also given to give an bigger view about the parameters, while the standardized beta for each variable used for model 1 and model 2, are given in table 5.10.

As you can see, moderating effect in model 2 for both cases, CMI or IMI, are significant.

CMI-model 2 has SQ-SP-Centered significance value at 0.010 while IMI-model 2 has SQSP-Centered significance value at 0.036. These are below 0.05 or 5%.

Table: 5.8 Comparison of significance level for Model 1

CMI-MODEL1 IMI-MODEL1

Constant	UNStd. Beta	Std.Error	Std .Beta	t	Sig	UNStd. Beta	Std.Error	Std. Beta	t	sig
Constant	-2.746	0.678	–	-4.053	0.000	0.911	0.389	–	2.344	0.020
SQ	1.272	0.136	0.478	9.357	0.000	0.742	0.072	0.513	10.236	0.000
SP	0.527	0.163	0.165	3.234	0.000	0.204	0.085	0.121	2.406	0.017

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction

While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

SQ= service quality and SP = Shari’ah perception

Table: 5.9 Comparison of significance level for Model 2

CMI-MODEL2 IMI-MODEL2

Constant	UNStd. Beta	Std.Error	Std.Beta	t	Sig	UNStd. Beta	Std.Error	Std.Beta	t	sig
Constant	3.549	0.078	–	42.720	0.000	4.433	0.040	–	110.798	0.003
SQ- CENTERED	1.157	0.142	0.435	8.17	0.000	0.806	0.078	0.557	10.308	0.000
SP- CENTERED	0.505	0.162	0.158	3.127	0.002	0.223	0.085	0.131	2.625	0.009
SQ-SP- CENTERED	-0.662 0.255		-0.136	-2.594	0.010	0.299	0.142	0.114	2.105	0.036

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction

While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

SQ= service quality and SP = Shari’ah perception SQ Centered= Service quality centered.

SP Centered = Shari’ah perception centered

SQ-SP-CENTERED shows the moderation effect of service quality and Shari’ah perception

Table: 5.10 Comparison of significance level for Model 1 & Model 2 (CMI & IMI Comparison)

0.742 0.072 0.513 10.23 0.000

SQ 1.272 0.136 0.478 9.357 0.000 – – – – – 6 – – – – –

0.204 0.085 0.121 2.406 0.017

SP 0.527 0.163 0.165 3.234 0.000 – – – – – – – – – –

Constant 3.549 0.078 – 42.720 0.000 4.433 0.040 – 110.798 0.003

– – – – – – – – –

Model 2

1.157 0.142 0.435 8.17 0.000 0.806 0.078 0.557 10.308 0.000

SQ-

– – – – – – – – –

CENTERED

0.505 0.162 0.158 3.127 0.002 0.223 0.085 0.131 2.625 0.009

SP-

– – – – – – – – –

CENTERED

-0.662 0.255 -0.136 -2.594 0.010 0.299 0.142 0.114 2.105 0.036

SQ-SP-

– – – – – – – – –

CENTERED

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction

While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

SQ= service quality and SP = Shari’ah perception

SQ-SP-CENTERED shows the moderation effect of service quality and _Shari’ah perception, SQ Centered= Service quality centered.SP Centered = Shari’ah perception centered.

5.6 Comparison of multicollinearity (CMI and IMI)

While the multicollinearity is also given for the variables as depicted in table 5.11 for CMIModel 1 and IMI-Model 1. This effect is reduce by the later the study due to use of centered variables for moderation. Multicollinearity is actually the correlation between the independent variables which affects the regression value for it is reduced by centered values and other was come out.

Table: 5.11 Coefficients Comparison of multicollinearity for Mode 1

CMI-Model 1 IMI- Model 1

Dimension	1	2	3	1	2	3
Eigenvalue	2.973	0.019	0.008	2.977	0.017	0.007
Condition Index	1	12.443	19.249	1	13.222	21.027
(Constant)	0	0.05	0.95	0	0.02	0.98
Service Quality	0	0.92	0.23	0	0.79	0.21
Shari’ah Perception	0	0.08	0.77	0	0.33	0.67

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

The multicollinearity for model 2, is also given for the variables as depicted in table 5.12 for CMI-Model 2 and IMI-Model 2. This also shows that the variable proportions increased by 1, considering the centered values. It has four dimensions.

Table: 5.12 Coefficients Comparison of multicollinearity for Model 2 CMI- Model 2 IMI- Model 2

Dimension	1	2	3	4	1	2	3	4
Eigenvalue	1.494	1.041	0.845	0.62	1.578	0.95	0.882	0.59
Condition Index	1	1.198	1.33	1.552	1	1.289	1.338	1.635
(Constant)	0.05	0.6	0.21	0.14	0.07	0.51	0.41	0
SQ- CENTERED*	0.21	0.06	0.13	0.6	0.19	0.11	0.01	0.69
SP- CENTERED*	0.12	0.2	0.63	0.05	0.09	0.24	0.67	0
SQ-SP- centered*	0.21	0.05	0.13	0.61	0.19	0.11	0	0.69

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction

While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

SQ= service quality and SP = Shari’ah perception

* SQ-SP-CENTERED shows the moderation effect of service quality and Shari’ah perception **SQ Centered= Service quality centered.

***SP Centered = Shari’ah perception centered.

5.7 Discussion of Hypotheses Summery

TABLE: 5.13 Hypotheses Summary Hypothesis Correlation F R² Status p-value Upheld/Rejected

(R², R² change)

H1 (Islamic)	0.528	–	–		Accepted
H1 (Conventional)	0.514	–	–		Accepted
H2 (Islamic)	0.186	–	–		Accepted
H2 (Conventional)	0.270	–	–		Rejected (it is not negatively correlated)
H3 (Islamic)	–	41.555	0.304	0.000	Accepted
H3 (Conventional)	–	42.013	0.307	0.002	Accepted
H4 (Islamic)			SQ(alone) 0.279** SQ(in moderation case) 0.304		Accept
H5 (Conventional)			SQ(alone) 0.264*** SQ(in moderation case) 0.307		Rejected (because moderation **SP form is more effective)

*SQ=service quality

**SP= Shari’ah perception

***SQ alone is calculated separately. For IMIs its value is R=0.528. R square and R square change are 0.279 while F and F change are 111.165 significant at 0.000 with Durbin Watson value of 1.864. While in case of CMIs its value is R= 0.514. R square and R square change are 0.264 while F and F change are 103.11 significant at 0.000 with Durbin Watson value of 1.201.

As you can see the results of hypotheses. All hypotheses are accepted, except the H2 for conventional microcredit clients and H5. Rejection of hypothesis H2 (conventional) is due to positive correlation occured in Shari’ah perception and client satisfaction in clients of conventional microfinance institutions. While we assume lesser Shari’ah perception resulted in higher client satisfaction which is rejected. It shows higher Shari’ah perception and higher client satisfaction than service. Rejection hypothesis H5 suggests that the combine form of service quality and Shari’ah perception has greater impact on the client satisfaction than the service alone on the client satisfaction. So it means moderation of Shari’ah perception works for clients of conventional microfinance institutions as well. While the other hypothesis also shows that Shari’ah perception has impact on the client satisfaction. So the moderation of Shari’ah perception is effecting client satisfaction.

Clients from CMIs have mindset, intrinsic feelings and envision about the Shari’ah perception. Because they want something more from their MFP to give them some relaxation in their microcredit terms. Interest perception is also reside in their mind. They don’t take it good for their optimal utilization of the awarded microloans. The terms and conditions of microcredit are affecting other decisions of loans. There are many other clients in CMIs who are not able to get another microcredit due to instructions and rules already provided and terms & conditions for already taken microcredit. They are satisfied but any change in any service or option provide to them, will make them to change their mind and they can easily switch to other organization who will give them more satisfactorily microcredit.

There is a huge segment, presents who do not avail the conventional microcredit due to interest payments or even they are not eligible to get conventional microcredit according to pre-terms and conditions. While the user of IMIs don’t bother much about service quality as compared to user of CMIs. But still it effects. Clients of IMIs have vivid envision of Shari’ah perception. That’s why they have chosen the IMIs. Easy way of repayments and no interest payment with principal amount, make them happier and more satisfied.

5.8 Comparison

After the results and hypotheses summary, here is the comparison of Islamic and conventional microfinance provider from Lahore, Punjab in Pakistan, representing the Islamic and conventional microfinance sector who are providing microcredits, with due reference of service quality, Shari’ah perception and client satisfaction. In this research I has developed five hypotheses after reviewing the literature to compare the both MFP streams in Pakistan. The results indicate that there is significant difference in the perception on the front board about CMIs and its clients and the clients of IMIs. That is positive. Both are have equal opportunities on gender basis but males are availing it more than females. But female percentage will grow with passage of time.

Similarly, there is significant relationship between service quality and client satisfaction as well as the Shari’ah perception towards client satisfaction by the responses of the clients of IMIs and CMIs. However, there are more things as well. That service quality which is offered by Islamic microfinance institutions, leads to greater satisfaction among clients of IMIs in moderating case of Shari’ah perception. This is moderation effect which is significant. Shari’ah perception moderating significantly among service quality and client satisfaction. While this thing of moderating role of Shari’ah perception also effecting the service quality and client satisfaction of CMIs and its clients. That is pretty propelling into that concept that client of CMIs are also soon be dissatisfied due to interest factor.

There is immense and unusual response of client of CMIs for Shari’ah perception and moderating role of Shari’ah perception. They also have something in their minds about the

Shari’ah or they are now fed up from interest rule out their lives. So that’s why the hypotheses H2 for Conventional and H5 are rejected. This is also a new click in mind about service quality with moderation effect have opened up new ways for CMIs to open Islamic microcredit window as the conventional banks have done recently in Pakistan to compete in market, otherwise they will lose their market segment. Comparison tables between IMI and CMI in microcredit F-value and R square values is as following.

Table: 5.14 Parameter’s Comparison (based on R, R-Square, F and Sig.)

	CMI-MODEL1	CMI-MODEL2	IMI-MODEL1	IMIMODEL2
R	0.539	0.554	0.542	0.552
R-Square	0.290	0.299	0.293	0.304
F	58.485	42.013	59.404	41.555
Sig.	0.000	0.000	0.000	0.000
Sig.F change	0.000	0.000	0.000	0.000
Std.Error	1.30686	1.29397	0.67306	0.66906
R-Square Change	0.29	0.307	0.293	0.304
F-Change	58.485	42.013	59.404	41.555
Durbin Watson	1.338	1.321	1.860	1.867

Model 1 has depicts the independent relationship to service quality and Shari’ah perception to client satisfaction. While Model 2 depicts the moderating relationship of Shari’ah perception between service quality and client satisfaction

CMI= Conventional Microfinance Institutions and IMI= Islamic Microfinance Institutions

Here is a comparison on the parameter’s t-value and significance (p-value) basis. This give a brief view of the independently affecting variables and their significance in model 1 and also in case of moderator SP in model 2. As you can see, in model 1 for both cases, CMI or IMI, are significant. There p value are below 0.05. As you can see, moderating effect in model 2 for both cases, CMI or IMI, are significant. CMI-model 2 has SQ-SP-Centered significance value at 0.010 while IMI-model 2 has SQ-SP-Centered significance value at 0.036. These are below 0.05. The negative relationship of interaction value in CMI shows, that service quality influences client satisfaction under the interaction effect of Shari’ah perception which is moderator. This term shows that as Shari’ah perception of client enhances, leaving client less satisfied, and the surrounding puts less pressure to adopt other alternative, Islamic microcredits.

Table: 5.15 Parameter’s Comparison (based on T-value and P-value)

	CMI-MODEL1		CMI-MODEL2			IMI- MODEL1			IMI- MODEL2
SQ	t	sig	t	Sig	t		Sig	t		sig
SQ	9.357	0.000	–	–	10.236		0.000	–		–
SP	3.234	0.000	–	–	2.406		0.017	–		–
SQ- CENTERED	–	–	8.170	0.000	–		–	10.308		0.000
SP-CENTERED	–	–	3.127	0.002	–		–	2.625		0.009
SQ-SP- CENTERED	–	–	-2.594	0.010	–		–	2.105		0.036

CMI= Conventional Microfinance Institutions

IMI= Islamic Microfinance Institutions

SQ= service quality, SP = Shari’ah perception, SQ centered= service quality centered, SP centered = Shari’ah perception centered.

SQ-SP-CENTERED shows the moderation effect of service quality and Shari’ah perception

Chapter 6 Conclusion, Implications & Recommendations

6.1 conclusion

This study has identified significant positive impact of service quality and the moderating role of Shari’ah perception on client satisfaction in case of Islamic microfinance institutions and conventional microfinance institutions. This has identified the gap between the common thoughts and mindset about the Shari’ah perception that unlike it is not effecting the conventional microcredit clients but in fact it is effecting clients of conventional microcredit as it is effecting the clients of Islamic microcredit.

This study reviews the role of service quality and the moderating role Shari’ah perception on client satisfaction that provide equal opportunities for all members of society. This is highly promoted by Islam due to positive measures to improve the life of the poor. In addition to it, clients of conventional microcredit are also have envision of Shari’ah perception which is the main click to be avail by the Islamic microfinance institutions to switch clients of conventional microcredits to Islamic microcredit.

It is concluded that managers of CMIs should think about to open Islamic microcredit window as banks had done. This is necessary to retain their clients, to compete in the market and to satisfy their client for long-term benefits. Similarly, they should make to arrange awareness among clients and employees for the improvement of their new Islamic products/services to enhance performance. While Islamic microfinance institutions should look upon the diversification of the same Islamic microcredit products and also their service quality to capture the more clients. This will improve their operations and there will be more profitability for IMIs in it.

This will give more chances to more poor people to avail more Islamic microcredits to improve or enhance their economic level and living standard. By this, IMIs can easily marketable and can be able to give awareness about their services according to Islamic instructions to compete with CMIs. This study has established an understanding about the relationship among service quality, Shari’ah perception and client satisfaction regarding Islamic and conventional microcredit and microfinance sector in Pakistan.

6.2 Implications

There are many implications or future aspects about this study but the major are five. First two are based on managerial practices while rest are based on future research. First one is that IMIs can use Shari’ah perception as tool to make certain strategies that the client of CMIs switch to Islamic microcredit by IMIs. This will increase their market segment and make them to lead the microcredit and microfinance sector. Secondly, this impacting role of moderation can be use in such a way to capture the client loyalty after they become satisfied. This will reduce the cost of switching of clients and this will enhance the profitability as well, because the marketing strategies will go hand in hand to this strategy.

Thirdly, as it is linked to psychology. We can form more links by using this envision or mindset of clients or peoples. We can make them to get benefits from Islamic microcredits to improve their economic conditions, instead of begging or weeping on their luck.so this will help in motivating them to use facility of Islamic microcredits.

Fourthly, due to my limitations as mentioned earlier, I can’t be able to incorporate interest rates, switching rate/cost and performance indicators in this study. This is one of the future perspective to work on it.

At last but not the least on, it will give a pace and space to research on service perception and client loyalty in the moderating relationship of Shari’ah perception between service quality and client satisfaction in future, regarding the comparison of Islamic and conventional microcredits in microfinance. On the basis of contribution of this study, other research work about this sector, product and differentiation about the actual and common concepts about Islamic microfinance and conventional microfinance sector in Pakistan, can be figure out.

6.3 Recommendations

On the basis of conclusion and implications, this research work suggests few recommendations towards two main bodies. Firstly, the policy makers of regulatory body SECP which is Securities and Exchange Commission of Pakistan which in foundations and NGOs case, regulate them. While secondly, the managers of MFIs who are working and have to make internal strategic policies and decisions. As Islamic microfinance institutions can use Shari’ah perception as tool to make certain strategies that the client of conventional microfinance institutions, switch to Islamic microcredit. This will increase their market segment and make them to lead the microcredit and microfinance sector. They should also make strategies to market and make more awareness about Islamic microfinance services, through which they can may tap the unaware people who are potential to become their client.

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Appendix I

MFI List in Pakistan

Most recent data of MFIs in Pakistan that are dealing with microfinance window.

MFI’s – most recent data 2016 Loans (USD) Borrowers

	Advans Pakistan Microfinance Bank	1,863,532		2,598
	AGAHE	1,292,577		10,991
	Akhuwat	54,940,831		469,017
	AMFB	25,304,255		21,614
	AMRDO	367,450		1,832
	ASA Pakistan	73,754,776		262,706
	Asasah	73,842		1,151
	Baldarie	343,014		2,599
	BEDF	306,200		2,132
	BRAC – PAK	12,509,250		54,021
	Buksh Foundation	122,768		623
	CSC	3,584,297		16,331
	DAMEN	10,920,704		44,814
	DEEP Foundation	38,132		1,250
	FFO	3,096,251		22,551
	FINCA Pakistan	52,228,388		89,550
	FMFB – Pakistan	53,265,901		176,738
	GBTI	1,265,776		10,937
	JWS	6,968,186		38,620
	Kashf Foundation	44,480,269		249,251
	Khushhali Bank	165,776,235		520,517
	MES	802,688		3,202
Micro Options			925,259		5,062
Mojaz			2,790,021		16,110
NAYMET			86,857		2,400
NRDP			1,610,834		8,128
NRSP			100,238,537		610,462
NRSP Bank			86,611,135		258,444
OPD			753,727		5,995
Orangi			5,462,518		45,256
Orix Leasing			3,899,270		23,109
OSDI			77,206		130
POMFB			3,757,385		16,334
PRSP			10,302,376		64,645
RCDS			11,410,240		63,620
Saath			957,491		5,796
SRDO			774,545		3,768
SRSO			10,133,018		61,656
SRSP			241,587		3,864
SSF			5,909,003		54,929
SSSF			974,543		8,444
Sungi			952,353		11,011
SVDP			1,156,787		5,498
SWWS			81,434		455
TMFB			116,168,637		287,285
TRDP			13,363,546		105,427
U Bank			8,771,468		22,300
VDO			153,386		1,785
Total			915 Million		3.7 million

Table: AI-1 Appendix II

MFP in Lahore

IMI’s – most recent data of 2016	Loans (USD)	Borrowers
Akhuwat	54,940,831	469,017
Asasah	73,842	1,151
DEEP Foundation	38,132	1,250
Kashf Foundation	44,480,269	249,251
NAYMET	86,857	2,400

Table: AII-1

CMI’s – most recent data of 2016	Loans (USD)	Borrowers
RCDS	11,410,240	63,620
DAMEN	10,920,704	44,814
Buksh Foundation	122,768	623
CSC	3,584,297	16,331

Table: AII-2 Appendix III

QUESTIONNAIRE

Dear Respondents;

The topic of this research is “Service Quality and the Moderating Effect of Shari’ah Perception on Client Satisfaction; A Comparison of Islamic and Conventional Microcredit in Pakistan”. Please read each question statement carefully and tick the option that best describes your response. Your cooperation is very important for the success of this study. Section 1:

Demographics Information

Address:		(optional)
Gender:	□Male □Female
Age (years)
Education (years)

1. Name: (optional) 2. E-mail: (optional)

What is your monthly household income in PAK Rupees?

8. Name of lending organization

Section 2:

Please indicate the extent you agree or disagree with the following statements.

{1 = Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 = Strongly Agree}

		Interest Perception
No	Details	Strongly Disagree	Disagree	Neutral	Agree	Strongly Agree
9	I think interest is not helpful for the wellbeing.	1	2	3	4	5
10	It interrupts me and create uneasiness in my other decision of life.	1	2	3	4	5

11	I consider to get microcredit on interest is not much expensive.	1	2	3	4	5
	Service Quality in Microcredit
12	My organization’s employees are well dressed and appear neat.	1	2	3	4	5
13	My organization keep save the clients’ record.	1	2	3	4	5
14	My organization keeps information available as required about microcredits.	1	2	3	4	5
15	Organization provides reports at the time it promises to do so.	1	2	3	4	5
16	When I have problems, my organization solved it.	1	2	3	4	5
17	My organization is dependable.	1	2	3	4	5
18	Employees of my organization are too busy to respond to customer requests timely.	1	2	3	4	5
19	Employees of my organization are not always willing to help customers.	1	2	3	4	5
20	I do not receive prompt service from employees of organization.	1	2	3	4	5
21	Employees of organization have caring nature towards customers.	1	2	3	4	5

22	Employees of organization try to understand my level of concern and worries.	1	2	3	4	5
23	My organization does not give me individual attention.	1	2	3	4	5
24	The organization does not know what my needs are.	1	2	3	4	5
25	Employees of organization are too good that I feel relax and confident.	1	2	3	4	5
26	I can trust in employees of my organization.	1	2	3	4	5
27	Employees of my organization are polite.	1	2	3	4	5
Shari’ah Perception
28	I give high value to Shari’ah in my general and business transactions.	1	2	3	4	5
29	I think Shari’ah based transactions are based on social welfare rather than profit maximization as per my knowledge.	1	2	3	4	5
30	There is no need of Shari’ah to know about halal or haram activities in business transactions.	1	2	3	4	5
31	Shariah does not mean anything to me in business or daily general transactions.	1	2	3	4	5
	Customer Satisfaction
32	Considering everything I am extremely satisfied with my organization.	1	2	3	4	5
33	My organization always meets my expectations.	1	2	3	4	5
34	The overall quality of my organization is excellent.	1	2	3	4	5
35	My organization’s employees solved satisfactorily the problems	1	2	3	4	5

THANK YOU FOR YOUR PATIENCE AND TIME

Appendix IV

Demographics for CMIs

Genders

Gender

Frequency

Percent

Valid Percent

Cumulative

Percent

Valid

Male

Female

192 97

66.4

33.6

66.4

33.6

66.4

100.0

Total

289

100.0

Table: AIV-1

Organization

Organization of Microcredit

Frequency Percent Valid Perc

Cumulative ent

Percent

Valid

RCDS

DAMEN

199 68.9 90 31.1

68.9

31.1

68.9

100.0

Total 289 100.0 100.0

Table: AIV-2

Age

Age

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	18.00 19.00 20.00 21.00 22.00 24.00 26.00 27.00 28.00 29.00 30.00 31.00 32.00 33.00 34.00	5 13 6 19 12 6 6 6 11 18 17 12 6 11 12	1.7 4.5 2.1 6.6 4.2 2.1 2.1 2.1 3.8 6.2 5.9 4.2 2.1 3.8 4.2	1.7 4.5 2.1 6.6 4.2 2.1 2.1 2.1 3.8 6.2 5.9 4.2 2.1 3.8 4.2	1.7 6.2 8.3 14.9 19.0 21.1 23.2 25.3 29.1 35.3 41.2 45.3 47.4 51.2 55.4
	35.00	12	4.2	4.2	59.5
	36.00	4	1.4	1.4	60.9
	38.00	10	3.5	3.5	64.4
	39.00	22	7.6	7.6	72.0
	40.00	10	3.5	3.5	75.4
	41.00	12	4.2	4.2	79.6
	42.00	12	4.2	4.2	83.7
	43.00	6	2.1	2.1	85.8
	45.00	21	7.3	7.3	93.1
	48.00	1	.3	.3	93.4
	49.00	6	2.1	2.1	95.5
	50.00	6	2.1	2.1	97.6
	51.00 Total	7 289	2.4 100.0	2.4	100.0
	51.00 Total	7 289	2.4 100.0	100.0

Table: AIV-3

Education

Education

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	.00 2.00 3.00 4.00 5.00 6.00 7.00	65 1 8 5 45 7 11	22.5 .3 2.8 1.7 15.6 2.4 3.8	22.5 .3 2.8 1.7 15.6 2.4 3.8	22.5 22.8 25.6 27.3 42.9 45.3 49.1
	8.00	30	10.4	10.4	59.5
	9.00	3	1.0	1.0	60.6
	10.00	39	13.5	13.5	74.0
	12.00	36	12.5	12.5	86.5
	14.00	31	10.7	10.7	97.2
	16.00	8	2.8	2.8	100.0
	Total	289	100.0	100.0

Table: AIV-4

Income

Income in PAK Rupees Cumulative

Frequency Percent Valid Percent

Percent

Valid	6500.00 7000.00 8000.00 8500.00 9000.00 9500.00 10000.00 11000.00 12000.00 12200.00 12500.00 13000.00	2 3 3 4 5 5 4 3 12 3 4 3	.7 1.0 1.0 1.4 1.7 1.7 1.4 1.0 4.2 1.0 1.4 1.0	.7 1.0 1.0 1.4 1.7 1.7 1.4 1.0 4.2 1.0 1.4 1.0	.7 1.7 2.8 4.2 5.9 7.6 9.0 10.0 14.2 15.2 16.6 17.6
	14800.00	1	.3	.3	18.0
	15000.00	23	8.0	8.0	26.0
	15500.00	3	1.0	1.0	27.0
	16000.00	11	3.8	3.8	30.8
	16800.00	3	1.0	1.0	31.8
	17000.00	8	2.8	2.8	34.6
	18000.00	10	3.5	3.5	38.1
	18700.00	1	.3	.3	38.4
	19000.00	10	3.5	3.5	41.9
	19500.00	1	.3	.3	42.2
	20000.00	12	4.2	4.2	46.4

21000.00 10 3.5 3.5 49.8

21200.00 1 .3 .3 50.2

21300.00 3 1.0 1.0 51.2

21500.00 3 1.0 1.0 52.2

22000.00 22 7.6 7.6 59.9

23000.00 7 2.4 2.4 62.3

24000.00 9 3.1 3.1 65.4

25000.00 8 2.8 2.8 68.2

26000.00 1 .3 .3 68.5

27000.00 7 2.4 2.4 70.9

28000.00 4 1.4 1.4 72.3

29000.00 6 2.1 2.1 74.4

30000.00 10 3.5 3.5 77.9

30900.00 3 1.0 1.0 78.9

31000.00 1 .3 .3 79.2

31400.00 1 .3 .3 79.6

32000.00 11 3.8 3.8 83.4

33000.00 3 1.0 1.0 84.4

34000.00 4 1.4 1.4 85.8

34700.00 3 1.0 1.0 86.9

35000.00 9 3.1 3.1 90.0

35500.00 1 .3 .3 90.3

36000.00 4 1.4 1.4 91.7

38000.00 8 2.8 2.8 94.5

39000.00 3 1.0 1.0 95.5

40000.00 4 1.4 1.4 96.9

41000.00 3 1.0 1.0 97.9

42000.00 2 .7 .7 98.6

43000.00	1	.3	.3	99.0
45000.00	3	1.0	1.0	100.0
Total	289	100.0	100.0

Table: AIV-5 Appendix V

Demographics for IMIs

Gender

Frequency

Percent

Valid Percent

Cumulative

Percent

Valid

Male

Female

162

127

56.1

43.9

56.1

43.9

56.1

100.0

Total 289 100.0 100.0

Table: AV-1

Organization

Organization of Microcredit

Frequency

Percent

Valid Percent

Cumulative

Percent

Valid

KASHF 99

AKHUWAT 190

34.3

65.7

34.3

65.7

34.3

100.0

Total 289 100.0 100.0

Table: AV-2

Age

Age

		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	18.00 19.00 20.00 21.00 22.00 23.00 24.00 25.00 26.00 27.00 28.00 29.00 30.00 31.00 32.00	5 12 5 2 2 12 5 12 6 29 9 17 5 2 25	1.7 4.2 1.7 .7 .7 4.2 1.7 4.2 2.1 10.0 3.1 5.9 1.7 .7 8.7	1.7 4.2 1.7 .7 .7 4.2 1.7 4.2 2.1 10.0 3.1 5.9 1.7 .7 8.7	1.7 5.9 7.6 8.3 9.0 13.1 14.9 19.0 21.1 31.1 34.3 40.1 41.9 42.6 51.2
	33.00	6	2.1	2.1	53.3
	34.00	10	3.5	3.5	56.7
	35.00	20	6.9	6.9	63.7
	36.00	5	1.7	1.7	65.4
	37.00	5	1.7	1.7	67.1
	38.00	20	6.9	6.9	74.0
	39.00	16	5.5	5.5	79.6
	41.00	10	3.5	3.5	83.0
	42.00	20	6.9	6.9	90.0
	45.00	19	6.6	6.6	96.5
	47.00	5	1.7	1.7	98.3
	50.00	5	1.7	1.7	100.0
	Total	289	100.0	100.0

Table: AV-3

Education

Education

	Frequency	Percent	Valid Percent	Cumulative Percent
.00 2.00 3.00 5.00 6.00 7.00 Valid	112 11 20 60 11 1	38.8 3.8 6.9 20.8 3.8 .3	38.8 3.8 6.9 20.8 3.8 .3	38.8 42.6 49.5 70.2 74.0 74.4
8.00	34	11.8	11.8	86.2
10.00	28	9.7	9.7	95.8
12.00	9	3.1	3.1	99.0
14.00	2	.7	.7	99.7
16.00	1	.3	.3	100.0
Total	289	100.0	100.0

Table: AV-4

Income Income in PAK Rupees

Cumulative

Frequency Percent Valid Percent

Percent

Valid	6000.00 9000.00 9500.00 10000.00 10500.00 11000.00 12000.00 13000.00 14000.00 14500.00	1 10 10 17 8 6 15 6 6 2	.3 3.5 3.5 5.9 2.8 2.1 5.2 2.1 2.1 .7	.3 3.5 3.5 5.9 2.8 2.1 5.2 2.1 2.1 .7	.3 3.8 7.3 13.1 15.9 18.0 23.2 25.3 27.3 28.0
	15000.00	27	9.3	9.3	37.4
	16000.00	5	1.7	1.7	39.1
	17000.00	8	2.8	2.8	41.9
	18000.00	13	4.5	4.5	46.4
	19000.00	26	9.0	9.0	55.4
	20000.00	29	10.0	10.0	65.4
	21000.00	7	2.4	2.4	67.8
	21200.00	5	1.7	1.7	69.6
	22000.00	17	5.9	5.9	75.4
	23000.00	12	4.2	4.2	79.6
	23400.00	1	.3	.3	79.9
	23500.00	1	.3	.3	80.3
	24000.00	7	2.4	2.4	82.7
	25000.00	15	5.2	5.2	87.9
	26000.00	5	1.7	1.7	89.6
	27000.00	2	.7	.7	90.3
	28000.00	9	3.1	3.1	93.4
	29000.00	4	1.4	1.4	94.8
	30000.00	6	2.1	2.1	96.9
	31000.00	2	.7	.7	97.6
	32000.00	1	.3	.3	97.9
	34000.00	1	.3	.3	98.3
	35000.00	3	1.0	1.0	99.3
	38000.00	2	.7	.7	100.0
	Total	289	100.0	100.0

Table: AV-5 Appendix VI

Calculations for CMI and IMI (MODEL 1 AND MODEL 2)

CMI (MODEL 1 AND MODEL 2)

Model Summary (CMI Model 1)

Mod R R Adjusted Std. Error Change Statistics Durbinel Square R Square of the R Square F Change df1 df2 Sig. F Watson

Estimate Change Change

1 .539^a .290 .285 1.30686 .290 58.485 2 286 .000 1.338

Predictors: (Constant), Shari’ah Perception, Service Quality
Dependent Variable: Client Satisfaction

Table: AVI-1

ANOVA CMI Model 1

Model Sum of Squares df Mean Square F Sig.

Regression 199.773 2 99.886 58.485 .000^b

1 Residual 488.455 286 1.708

Total 688.228 288

Dependent Variable: Client Satisfaction
Predictors: (Constant), Shari’ah Perception, Service Quality

Table: AVI-2

Correlations(CMI-MODEL 1)

Service Quality Shari’ah Perception Client Satisfaction

Service Quality

.220^** 1

Shari’ah Perception

.514^** .270^** 1

Client Satisfaction

**. Correlation is significant at the 0.01 level (2-tailed).

*. N=289

Table: AVI-3

Coefficients (CMI-MODEL 1)


Model	Unstandardized Standardized t Coefficients Coefficients	Sig.	Correlations	Collinearity Statistics
	B Std. Beta Error		Zero- Partial Part order	Tolerance VIF
(Constant) Service 1 Quality	-2.746 .678 -4.053 1.272 .136 .478 9.357	.000 .000	.514 .484 .466	.952 1.051
*Shari’ah*	.527 .163 .165 3.234	.001	.270 .188 .161	.952 1.051

Perception

Dependent Variable: Client Satisfaction

Table: AVI-4

Collinearity Diagnostics(CMI-MODEL 1)

Model Dimension Eigenvalue Condition Variance Proportions

Index (Constant) Service Quality Shari’ah

Perception

1 2.973 1.000 .00

1 2 .019 12.443 .05

.00

.92

.00

.23

3 .008 19.249 .95

a. Dependent Variable: Client Satisfaction

Table: AVI-5

.08

.77

Model Summary (CMI Model 2)

Mod R R Adjusted Std. Error Change Statistics el Square R Square of the R Square F df1 df2

Estimate Change Change

1 .554^a .307 .299 1.29397 .307 42.013 3 285

a. Predictors: (Constant), SQ_SP_CENTERED, Shari’ah Perception, Service Quality b. Dependent Variable: Client Satisfaction

Table: AVI-6

ANOVA (CMI Model 2)

Sig. F

Change

.000

Durbin-

Watson

1.321

Model Sum of Squares Df Mean Square F

Sig.

Regression 211.036 3 70.345 42.013 .000^b

1 Residual 477.192 285 1.674

Total 688.228 288

Dependent Variable: Client Satisfaction
Predictors: (Constant), SQ_SP_CENTERED, Shari’ah Perception, Service Quality

Table: AVI-7

Correlations (CMI Model 2)

Client SQ- SP-

		Satisfaction	CENTERED	CENTERED		SQ_SP_CENTERED
Pearson Client Satisfaction Correlation		1.000
SQ-CENTERED		.514	1.000
SP-CENTERED		.270	.220		1.000
SQ_SP_CENTERED Table: AVI-8		-.297	-.328		-.120		1.000

		Coefficients (CMI Model 2)
Model	Unstandardize d Coefficients Std. B Error	Standardize d Coefficients Beta t Sig.			Correlations		Collinearity Statistics Toler ance VIF
				Zero – orde Partia r l Part
1 (Constant)	3.549 .078	45.720 .000
SQ- CENTERED	1.157 .142	.435 8.170 .000		.514 .436 .403			.859 1.164
SP- CENTERED	.505 .162	.158 3.127 .002		.270 .182 .154			.949 1.054
SQ_SP_CENT ERED	-.662 .255	-.136 -2.594 .010		-.297 -.152 -.128			.890 1.124

Dependent Variable: Client Satisfaction

Table: AVI-9

Collinearity Diagnostics (CMI Model 2)

Model Dimension Eigenvalue Condition Variance Proportions

Index (Constant) SQ- SP- SQ_SP_CEN

CENTERED CENTERED TERED

1 1.494 1.000 .05 .21 2 1.041 1.198 .60 .06 1 3 .845 1.330 .21 .13	.12 .20 .63	.21 .05 .13
4 .620 1.552 .14 .60 a. Dependent Variable: Client Satisfaction Table: AVI-10 IMI (MODEL 1 AND MODEL 2) Correlations( IMI-MODEL 1)	.05	.61
Client Service Quality Satisfaction		*Shari’ah* Perception
Client Satisfaction 1.000 Pearson Correlation Service Quality .528 1.000		.
*Shari’ah* Perception .186 .128 *. Correlation is significant at the 0.01 level (2-tailed). . N=289 Table: AVI-11 Model Summary (IMI Model 1)		1.000
Mod R R Adjusted Std. Error Change Statistics		Durbin-

el Square R Square of the R Square F Change df1 df2 Sig. F Watson

Estimate Change Change

1 .542^a .293 .289 .67306 .293 59.404 2 286 .000 1.860

Predictors: (Constant), Shari’ah Perception, Service Quality
Dependent Variable: Client Satisfaction

Table: AVI-12

ANOVA (IMI Model 1)

Model Sum of Squares Df Mean Square F Sig.

Regression

Residual

53.822

129.562

286

26.911 .453

59.404

.000^b

183.384

288

Total

Dependent Variable: Client Satisfaction
Predictors: (Constant), Shari’ah Perception, Service Quality

Table: AVI-13

Coefficients (IMI-MODEL 1)


Model	Unstandardized Coefficients	Standardized T Coefficients	Sig. Correlations Collinearity Statistics
	B Std. Error	Beta	Zero- Partia Part Tolera order l nce	VIF
(Constant) Service 1 Quality	.911 .389 .742 .072	2.344 .513 10.236	.020 .000 .528 .518 .509 .984	1.017
*Shari’ah* Perception	.204 .085	.121 2.406	.017 .186 .141 .120 .984	1.017
a. Dependent Variable: Client Satisfaction Table: AVI-14			.017 .186 .141 .120 .984	1.017

Collinearity Diagnostics(IMI-MODEL 1)

Model Dimension Eigenvalue Condition Variance Proportions

Index (Constant) Service Quality Shari’ah

Perception

2.976 .017

1.000

13.222

.00 .02

.00 .79

.00 .33

.007

21.027

.98

.21

.67

Dependent Variable: Client Satisfaction

Table: AVI-15

Correlations (IMI Model 2)

CENTERE

Client SQ D

		Satisfaction	CENTERED		SQ_SP_CENTERED
Pearson Correlatio n	Client Satisfaction	1.000
	SQ CENTERED	.528	1.000
	SP CENTERED	.186	.128	1.000
	SQ_SP_CENTERE D	-.082	-.333	-.110	1.000

*.N=289

**. Correlation is significant at the 0.05 level (2-tailed).

Table: AVI-16

Model Summary (IMI Model 2)

Mo R R Adjuste Std. Error Change Statistics Durbindel Square d R of the R Square F Change df1 df2 Sig. F Watson

Square Estimate Change Change

1 .552^a .304 .297 .66906 .304 41.555 3 285 .000 1.867

Predictors: (Constant), SQ_SP_CENTERED, SP_CENTERED, SQ_CENTERED
Dependent Variable: Client Satisfaction

Table: AVI-17

ANOVA (IMI-MODEL 2)

Model Sum of Squares df Mean Square F Sig.

Regression

1 Residual

Total

Table: AVI-18

Unstandard ized

Coefficients Std. Erro

Model		B	r
1	(Constant)	4.433	.040
	SQ CENTERED	.806	.078
	SP CENTERED	.223	.085
	SQ_SP_CEN TERED	.299	.142

55.806 3 18.602 41.555 .000^b

127.578 285 .448

183.384 288

Coefficients (IMI Model 2) Stand ardize

Coeffi Collinearity cients Correlations Statistics

Zero- Part Tolera

Beta T Sig. order ial Part nce VIF

110.798 .000

.557 10.308 .000 .528 .521 .509 .836 1.196

.131 2.625 .009 .186 .154 .130 .973 1.028

.114 2.105 .036 -.127 .124 .104 .832 1.202

Dependent Variable: Client Satisfaction

Table: AVI-19

Collinearity Diagnostics^a

Model Dimension Eigenvalue Condition Variance Proportions

Index (Constant) SQ SP SQ_SP_CEN

CENTER CENTERED TERED

1.578

.950

.882 3

1.000

1.289

1.338

.07 .51 .41

.19 .11 .01

.09 .24 .67

.19 .11 .00

.590

1.635

.00

.69

.00

.69

Dependent Variable: Client Satisfaction

Service Quality And The Moderating Effect Of Shari’ah Perception On Client Satisfaction: A Comparison Of Islamic And Conventional Microcredit In Pakistan

Certificate

ACKNOWLEDGEMENTS

TABLE OF CONTENTS

Chapter 2: Literature Review……………………………………………………….11

Chapter 3 Microfinance and microcredit Overview…….……………………..25

Chapter 6: Conclusion, Implications & Recommendations………………………….64

LIST OF TABLES

LIST OF ABBREVIATIONS

Chapter 1 Introduction

4.1 Aims and objectives

4.2 Rationale and motivation

Chapter 2 Literature Review

2.1 Overview

2.2 Historic Studies

2.4 Literature Summary

Chapter 3 Microfinance and Microcredit Overview

3.1 Global Overview

Table: 3.1 Forecasted Portfolio of Growth of Global MFI Regions 2015

Forecast Portfolio Growth 2015

Table: 3.2 Institutional Development

3.2 Asia-Pacific and South Asian Overview

Table: 3.3 MFI countries in South Asia (2014)

3.3 Microcredit in Pakistan

3.3.1 Conventional Microcredit in Pakistan

3.3.2 Islamic Microcredit in Pakistan

Table: 3.4 IMIs 2015

TABLE: 3.5 CMIs 2015

Chapter 4 Methodology

4.1 Research methodology

4.1.1 Target population

4.1.2 Sample size and technique

4.1.3 Research design

4.1.4 Research strategy

4.1.5 Research method

4.1.5.1 Questionnaire

4.1.5.2 SPSS Process

4.2 Limitation and difficulties

Chapter 5 Result & Discussion

5.1 KMO & Bartlett’s test and Reliability/ Cronbach’s α

Table: 5.1 KMO and Bartlett’s Test CMI IMI

Table: 5.2 Cronbach α

5.2 Descriptive Statistics Comparison (CMI and IMI)

5.3 Correlations Comparison (CMI and IMI)

Table: 5.5 Correlation for variables

Table: 5.6 Correlation for Moderation

5.4 Model Summary (Comparison of CMI and IMI)

5.5 Comparison of significance level (CMI and IMI)

Table: 5.8 Comparison of significance level for Model 1

CMI-MODEL1 IMI-MODEL1

Table: 5.9 Comparison of significance level for Model 2

CMI-MODEL2 IMI-MODEL2

Table: 5.10 Comparison of significance level for Model 1 & Model 2 (CMI & IMI Comparison)

5.6 Comparison of multicollinearity (CMI and IMI)

Table: 5.11 Coefficients Comparison of multicollinearity for Mode 1

CMI-Model 1 IMI- Model 1

Table: 5.12 Coefficients Comparison of multicollinearity for Model 2 CMI- Model 2 IMI- Model 2

5.7 Discussion of Hypotheses Summery

TABLE: 5.13 Hypotheses Summary Hypothesis Correlation F R² Status p-value Upheld/Rejected

5.8 Comparison

Table: 5.14 Parameter’s Comparison (based on R, R-Square, F and Sig.)

Table: 5.15 Parameter’s Comparison (based on T-value and P-value)

Chapter 6 Conclusion, Implications & Recommendations

6.1 conclusion

6.2 Implications

6.3 Recommendations

Chapter 7 References

Appendix I

MFI List in Pakistan

MFI’s – most recent data 2016 Loans (USD) Borrowers

MFP in Lahore

Table: AII-1

QUESTIONNAIRE

1. Name: ______________________ (optional) 2. E-mail: ______________________ (optional)

8. Name of lending organization

Appendix IV

Demographics for CMIs

Gender

Table: AIV-1

Organization of Microcredit

1. Name: (optional) 2. E-mail: (optional)