Trust-Loyalty Relationship Model in Islamic Banking: Evidence from Indonesia

Abstract

Purpose

The purposes of this study are three-folds, first, to proposethe construct of trust, second to validate the trust model and finally to find out whether or not the trust dimensions impact customer loyalty.

 Design/methodology/approach

The data was collected through self-administered questionnaires with a total of 196 respondents of Islamic banking customers. After conceptualizing trust and loyalty variables, dimensions and indicators are examined. To validate whether or not the indicators reflect the variable conceptualization, Confirmatory Factor Analysis (CFA) wasapproached. While to find out the impact of trust dimensions on loyalty, Structural Equation Modeling (SEM) was employed.  Before conducting the analysis, however, the goodness of fit of the model hadbeen examined.

 Findings

Drawing from the literature review, this study proposes four dimensions of trust; sharia, competence, integrity and benevolence and two dimensions of loyalty; behavioral and attitudinal. Confirmatory factor analysis reveals that from the twenty-five indicators, five indicators should be dropped (loading factor<0.5). Since the proposed model shows goodness of fit (RMSA=0,072), regression analysis among dimensions could be further investigated. The findings are interesting. Only sharia and benevolence dimensions significantly impact attitudinal loyalty (t=2.52 and t=3.32 respectively) and no dimensions of trust impact behavioral one. However, it is evidenced that attitudinal loyalty significantly impact behavioral (t=5.11). Therefore, it could be expected that sharia and benevolence dimensions indirectly impact behavioral loyalty through attitudinal as mediating variable.

 Originality/value

The study contributes to trust model and the relationship among trust and loyalty dimensions in Indonesian Islamic banking context.