What drives Islamic banking customers’ satisfaction and loyalty: financial or spiritual benefits?

Abstract

ABSTRACT This study empirically investigates the effects of financial and spiritual benefits on the satisfaction and loyalty of Islamic banking customers in Indonesia. It also attempts to explore the role of satisfaction as a mediator on the relationships between financial and spiritual benefits and loyalty of Islamic banking customers in Indonesia. A number of 148 Islamic banking customers in the municipality of Banda Aceh, Indonesia was selected as the sample of study using the purposive sampling technique. The study gathered the primary data by distributing questionnaires to the respondents and then analyzed using the Structural Equation Modeling (SEM) technique. The study found that spiritual benefits significantly influenced the satisfaction and loyalty of Islamic banking customers, while financial benefits have an insignificant effect on their satisfaction and loyalty. In addition, satisfaction is found to significantly and partially mediate the effect of spiritual benefits on the loyalty of Islamic banking customers. In contrast, satisfaction is found to have an insignificant mediated effect on the financial benefits and customers’ loyalty relationship. These findings show the importance of the Islamic banking industry to offer more spiritual benefits to enhance customers’ satisfaction and loyalty. For this purpose, Islamic banks should ensure their operation, products, and services are in harmony with the Islamic tenets (Sharia compliance).