Operations Management in Banking. Comparative Study of Islamic and Conventional Banks in Kenya

Abstract

The study was set to analyze operations management in banking: - comparative study of Islamic and conventional banks in Kenya. The objectives of the study were to compare and document unique operational management practices between Islamic and conventional banks in Kenya and to identify differences in service capacity, internal layout and technology, between Islamic and conventional banks in Kenya. The study was guided by the following research questions; Are product and service designs for Islamic Bank similar to those of Conventional Bank?, Are there disparities in quality of operations between Islamic Banks and Conventional Banks?, Are products offered by Islamic Banks similar to those offered by Conventional Banks?, What are the unique operational processes and practices between Islamic Bank and Conventional Bank?, Are there differences in Information Technology platform for Islamic Bank as compared to that of Conventional Bank? and Are supply chains in terms of correspondent banking networks the same for Islamic Bank as those of Conventional Bank The study adopted a case study method to achieve the research objectives. This method was appropriate for this particular phenomenon where details and uniqueness were emphasized. Islamic banks in Kenya constitute a small population and it's a relatively new phenomenon. Descriptive statistics such as frequency and percentages were used to analyze the responses and the findings were presented using charts and tables. The study found that both Islamic and conventional banks had operation policies in place. There was a significant difference in terms of auditing, that is, 90.9% of the respondents from the Islamic bank were of the opinion that their bank carry out regular audit to ensure specific faiths based compliance in operations and processes while none of the convention bank carries out regular audit to ensure specific faiths based compliance in operations and processes. Majority of the respondents further expressed the opinion that all operation management practices were not similar across the banking industry. In terms of differences in service capacity, internal layout and technology, the study found out that; functionality of IT used in Islamic bank differs from those used by other banks while those from conventional banks indicated that the functionality of IT used in their organization do not differ from those used by other banks, IT designed in the Islamic bank supported Islamic Financing by providing firewalls to guard against Shariah Breach in a transaction while IT designed for convention bank does not to support Islamic Financing by providing firewalls to guard against Shariah Breach in a transaction, the office layout for Islamic bank also differs from those of the convention banks and both Islamic and convention bank had correspondent banking networks in terms of service delivery.