Determinants of customer loyalty in Islamic banking: the role of religiosity

Abstract

Purpose The purpose of this study is to investigate the moderation effects of religiosity in the relationship between service quality (SQ), customer satisfaction (CS), relationship quality (RQ) and Islamic banking (IB) loyalty in a non-Islamic country. Design/methodology/approach This study used a quantitative approach and a cross-sectional research design. The data was collected by a closed-ended questionnaire from a systematic sample of 267 customers of full-fledged Islamic banks in Tanzania. Structural equation modeling and regression analysis techniques were used to analyze the data. Findings Results indicate that religiosity is a significant (p < 0.05) moderator of the relationship between SQ and loyalty (β = 0.176), and between CS and loyalty (β = 0.263). However, religiosity sharpens the impact of CS on loyalty (β increases from 0.170 to 0.263, p < 0.05) and does not sharpen the impact of SQ on loyalty (β decreases from 0.338 to 0.176, p < 0.05). The results further indicate that religiosity is not a significant moderator (p > 0.05) in the link between RQ and loyalty (β = −0.112). Research limitations/implications This study used only full-fledged Islamic banks in Tanzania. Therefore, future research could be undertaken by including conventional banks that have introduced an IB window. Practical implications To build and maintain a loyal customer base, Islamic banks should take advantage of religiosity by providing a wide range of Sharia-based products and services that truly distinguish them from conventional banks. Accordingly, policymakers should establish an appropriate legal framework to enable Islamic banks to leverage religiosity to sharpen the impact of CS on loyalty and hence maintain loyalty in non-Islamic countries like Tanzania. Originality/value This study proposes and validates the theoretical model of loyalty in IB by showing the role of religiosity as a moderator in a non-Islamic country. This knowledge strengthens the overall understanding of loyalty in IB. To the best of the authors’ knowledge, this study is the first to examine the moderation effects of religiosity in the link between RQ and loyalty, and thus between SQ, CS, RQ and loyalty in a single study.

A systematic review of customer Sharia compliance behaviour in Islamic banks: determinants and behavioural intention

“…Muslim clients believe that subscribing to Islamic banks is in accordance with their beliefs (Shah et al , 2023). For this reason, Islamic banks must be usury-free, as Islam prohibits usury to have an Islamic banking reputation (Tegambwage and Kasoga, 2023). Once a consumer perceives that an Islamic bank has an Islamic brand, he or she will have the intention to continue using the services of an Islamic bank, which in turn will boost customer compliance (Hoque et al , 2022).…”

“…Samad et al (2022) discovered that religiosity affects people’s attitudes and their decision to become customers of an Islamic financial organization. Tegambwage and Kasoga (2023) discovered that the leading reason people prefer to save their money in Islamic banks is their commitment to Islamic principles; consumers’ selection of Islamic banks is tied to questions of faith and belief in the prohibition of usury for Muslims (Alharbi et al , 2021; Alzadjal et al , 2021). Observant Muslims will be attracted to using Islamic-branded products sustainably and will continue to do so, and this demonstrates their adherence to Sharia.…”

Consumer behavior in Islamic banking: a systematic literature review and agenda for future research

“…One set of theories focuses on explaining the different aspects of value creation by IBs. For instance, stakeholder theory is used to examine CSR practices' impact on customer loyalty (Muflih, 2021), the resource-based view theory to explore the religiosity's influence on customer loyalty determinants (Tegambwage and Kasoga, 2023), relationship theory and social identity theory to analyze factors affecting customer satisfaction (Roberts-Lombard, 2020), Weber's theory and Durkheimian theory to investigate ethnicity's role in IB selection criteria (Abdul Hadi and Muwazir, 2021), and utility maximization theory to compare deposit determinants in IBs and conventional banks (Akhtar et al , 2017).…”

“…For instance, 113 test religiosity and trust as consumer perception variables along with PEU from the usability dimension. Religiosity is observed to be a significant driving force influencing consumer preferences (Junaidi et al , 2022a; Tegambwage and Kasoga, 2023), behavioral intentions in general (Panggi et al , 2022) and loyalty in specific (Suhartanto et al , 2019) for IB products. Furthermore, the consumer experience dimension factors like attitude, trust and social influence act as determinants of IB/IB product adoption (Ezeh, 2022; Maryam et al , 2022).…”

“…Among the reviewed studies, about 9% of the investigation includes moderating variables, which can impact the strength or direction of the relationship between independent and dependent variables (Baron and Kenny, 1986). The moderating variables examined include behavioral factors such as experience (Samsudeen et al, 2022;Parayil Iqbal et al, 2023) and habit (Mohd Thas Thaker et al, 2022), financial factors such as profit-loss sharing and perceived financial risk (Asyari et al, 2022), firm-related factors such as the type of bank (Rizkiah et al, 2021) and corporate image (Abd Aziz, 2018), religious factors such as religiosity (Alzadjal et al, 2022;Tegambwage and Kasoga, 2023) and Shariah compliance perception (Saqib et al, 2016) and sociodemographic factors such as age and gender (Samsudeen et al, 2022;Parayil Iqbal et al, 2023). By using moderated mediation analysis, existing studies investigate the concept of bank affiliation, which encompasses the association between customers and a particular bank.…”