Mediating the Effects of Customer Satisfaction and Bank Reputation on the Relationship between Services Quality and Loyalty of Islamic Banking Customers

Azmi Ati, M. Shabri Abd. Majid, Nasir Azis
Faculty of Economics & Business, Universitas Syiah Kuala

Abdul Hamid
Faculty of Islamic Economics & Business, Islamic State Institute of Langsa


Amidst a fierce competition within the global banking industry, the issue of retaining existing loyal customers and attracting new customers has been a focus for Islamic banks worldwide, including Islamic banks in Indonesia. Considering this pressing issue, the present study empirically measures and analyzes the mediating effects of bank reputation and customer satisfaction on the relationship between service quality and the loyalty of Islamic banking customers. Out of 113,146 customers of Bank Mandiri Syariah (BSM) in the Banda Aceh City, Indonesia, 320 of them were selected as the respondents for the study using a purposive sampling technique. Data were gathered by distributing questionnaires to the respondents and analyzed using Structural Equation Modeling (SEM). The study recorded that while service quality has a significant positive influence on bank reputation and customer satisfaction, it has an insignificant effect on customer loyalty. Bank reputation and customer satisfaction were also documented to have significant mediating effects on the relationship between service quality and customer loyalty. These findings suggest that in order to enhance customer loyalty further, bank management should design a proper strategy focusing on improving bank reputation and customer satisfaction by strengthening service quality.

Keywords: Customer loyalty, Digital-based services, Shariah compliant based services