Customer Satisfaction and Loyalty in Islamic Banking: The Role of Quality, Economic, and Image

Abstract

This study is conducted to evaluate the effect of service quality, economic, and image in determining customer satisfaction and loyalty towards Islamic Bank. Accordance with the provisions of DSN-MUI Islamic Banks are required to run their business based on Islamic principles. Serving customers maximally is a form of applying Islamic principles in business ethics. The data were obtained by distributing questionnaires to 280 customers of Islamic banks in two cities, Medan and Bandung. This study uses Partial Least Square Structural Equation Model (PLS-SEM). The data analysis results show that service quality (measured by tangible, assurance, empathy, and responsiveness) is an important determinant of customer satisfaction and loyalty. Image only gives significant impact on satisfaction but not on loyalty. From managerial perspective, this study provides a guidance for Islamic bank managers that beside providing high service quality, they also need to be efficient as well as to have a favorable image as important strategies for advancing their banks competitive advantage. The results of this study can be used as a consideration for company management through improving services to customers and forming a good image in the society because it can be a positive signal to increase customer satisfaction and loyalty.