The Effect of Trust, Customer Satisfaction and Image on Customers' Loyalty in Islamic Banking Sector

This study attempts to investigate the role of customer trust, satisfaction and image in enhancing Malaysian Islamic bank customers' loyalty. This study was carried out using data from Islamic banks and dual-window Islamic banks in Malaysia, with respect to two different customer segments (i.e., Muslim and non-Muslim). Two leading fully fledged Islamic banks (Bank Islam Malaysia Berhad and Bank Muamalat Malaysia Berhad), and two dual-window Islamic banks (Maybank and Public Bank) were involved in this study. A multiple group data analysis was used to test the significant differences between Muslim and non-Muslim customers. The results show that there were not significant differences between Muslim and non-Muslim customers on customer satisfaction, image, trust, and customer loyalty in Islamic banks. The study revealed that image was found to be positively significant to trust, and the highest level of trust leads to enhanced customer loyalty. The results of this study explain that both Muslim and non-Muslim customers trust islamic banks. However, the possibility of customers' distrust of their banks always exists. INTRODUCTION In Malaysia, the characteristics of Islamic banks are not merely of interest to Muslim customers but clearly non-Muslims customers see benefits from such a system. For Muslim customers, they have an opportunity to invest in a bank that operates based on their religious beliefs. Meanwhile, non-Muslim customers also have the same opportunity to choose to invest their money in Islamic banks or conventional banks. In this situation, Islamic banks are competing m the same market segmentation with conventional and foreign banks. Although, there is a difference between Islamic banks and conventional banks, they are nonetheless competing in the same market in terms of offering complementary products and services (Naser and Moutinho, 1997). Islamic banking is different from the conventional banking system, but there are some similarities between the two. For example, all banking facilities such as saving accounts, current accounts, credit cards and other products and services are available at Islamic banks (Naser and Pendlebury, 1997; and Naser et al., 1999). Today, due to availability of innovative products and services in Malaysian banking sector, the competition to attract and retain Muslim and non-Muslim customers is likely to increase. For example, Bank Islam Malaysia Berhad (BIMB) reported that some 70-80% of the banks' trade and corporate financing are with non-Muslim customers (Ngui, 2004). Interestingly, both Muslim and nonMuslim customers showed a good understanding in term of products and services offered by Islamic banks in Malaysia (Muslim and Zaidi, 2008). This evidence indicated that Islamic banks in Malaysia are widely accepted by nonMuslim customers. In business, trust is viewed as one of the most relevant antecedents of stable and collaborative relationships. Researchers had established that trust is essential for building and maintaining long-term relationships (Rousseau et al, 1998; and Singh and Sirdeshmukh, 2000). Morgan and Hunt (1994) stated that trust exists only when one party has confidence in an exchange partner's reliability and integrity. While defining trust Moorman et al (1993) referred to the willingness to rely on an exchange partner in whom one has confidence, according to Lau and Lee (1999), if one party trust another that eventually engenders positive behavioral intentions towards the second party. Moreover, from Anderson and Narus (1990), it can be safely deduced that if one party may bring positive outcomes to the first party, trust can be developed. Similarly, Doney and Cannon (1997) added that the concerned party also must have the ability to continue to meet its obligations towards its customers within the cost-benefits relationship; so, the customer should not only foresee the positive outcomes but also believe that these positive outcomes will continue in the future. …