Antecedents of customer loyalty: An empirical investigation in the Indonesian islamic banking industry

There has been a significant growth in the market share of Islamic banking in countries like Indonesia over the past decade. However, the Islamic banking industry in Indonesia is facing fierce competition from conventional banks. Accordingly, there has been calls for examining factors impacting customer loyalty for maintaining Islamic banks’ profitability and sustainability. While past scholarly work has focused on explaining customer loyalty towards Islamic banks from organisational perspective focusing on the role of service quality and bank reputation in enhancing customer loyalty, relatively less attention has been paid to understanding the role of customers’ self-related variables such as Islamic banking literacy, self-brand connection and religiosity in explaining customer loyalty. Past studies have also ignored the potential interplay between the organisational and self-related variables in explaining customer loyalty within the Islamic banking sector. Taking insights from multiple theoretical domains, this research aimed to develop a deeper understanding of customer loyalty towards Islamic banks in Indonesia and investigated both the individual as well as the combined effects of organisational and self-related variables in predicting customer loyalty. An extensive review of literature led to the development of a conceptual model of customer loyalty within the Indonesian Islamic banking perspective. The research employed a mixed methods approach involving both qualitative and quantitative approaches. Using a discussion guide, 25 in-depth interviews were conducted with customers of Islamic banks in Indonesia. All interview sessions were voice-recorded, transcribed, and analysed using a content analysis. Insights from in-depth interviews and wider academic literature were combined to develop an online questionnaire which was then used to collect data from 289 customers of Islamic banks in Indonesia. The Structural Equation Modelling approach was utilised to analyse quantitative data which included estimating both the Measurement Model and the Structural Model estimation for testing the conceptual model. Findings from qualitative phase point towards a deeply entrenched religious-self that 3motivated Islamic bank patronage and usage behaviour. The same religious-self also significantly underpinned customer loyalty towards Islamic banks in Indonesia. Findings from the quantitative phases show that customer loyalty is predicted by service quality, trust, commitment and Islamic banking literacy. Moreover, service quality is in turn impacted by corporate reputation and self-brand connection. Also, commitment is impacted by Islamic banking literacy, corporate reputation and self-brand connection. Similarly customer trust is impacted by corporate reputation and self-brand connection. Finally, Islamic banking literacy, religiosity and corporate reputation significantly predict customer self-brand connection. The study is the first of its kind and makes a strong contribution towards a customer relationship marketing theory, particularly customer loyalty literature by providing deeper insights into how and in what sense customer loyalty is developed in a Muslim majority country such as Indonesia using both faith and non-faith perspectives. It is also novel in combining the effects of both organisation and self-related variables and thus makes a strong contribution to not only the customer loyalty literature but also to the customer self-brand connection literature. The study discusses important theoretical and managerial implications and suggests further research agenda. Keywords: loyalty, commitment, service quality, trust, customer-based corporate reputation, self-brand connection, religiosity, Islamic banking literacy, Islamic banking, Indonesia, Muslim