Factors Influencing Customers Loyalty Towards Islamic Banking: A Case Study in Gombak, Selangor

The Islamic banking system governs two (2) basic principles which are mutual sharing of profit or loss and the prohibition of the collection and payment of interest. These basic principles are important to the establishment of an Islamic bank. Islamic law prohibits any activities that involve interest, gambling and speculative. Having great competition with foreign and conventional bank, Islamic banking industry needs variety of services and products to be offered to attract customers which is in compliance with shariah law. Thus, the main objective of this study is to examine the factors that influence customer’s loyalty towards Islamic banking. The independent variables include shariah compliant, product quality, service quality, and convenience. This study is conducted using structured questionnaire and were personally administrated across 303 respondents in Gombak, Selangor. This study is significantly important for the industry to find out the explanations and motive of customer’s loyalty in Islamic banks. Eventually, it will help the industry to establish a better services and products for the customers.


INTRODUCTION
In this decade, Islamic banking industries now has the advantages by offering dual-banking system. This is because, Muslims nowadays tend to engage in business that comply with Islamic principles. Thus, by offering conventional and Islamic bank services, these banks became more favourable to the customers. Malaysia is considered one of the pioneers in creating full fledge Islamic banking system parallel to the existing conventional system. However, due to high competition in this industry, most of the Islamic Bank have to compete with not only the existing conventional banks but also other Islamic dual-banking systems. The increasing of competition in banking industries lead to the problem where Islamic banks having problems in attracting new customers and at the same time retained their existing customers due to all these 12 banks (Islamic or conventional) competing in the same market segments by offering wide variety of services and products i.e. saving accounts, current accounts, credit cards, hire purchase financing, mortgage financing, and others. These days, all individuals Muslims or non-Muslims have a lot of choices to choose the best quality of products and services offered by banks. As customers, they may demand a high quality of financing products and services as this will bring satisfaction to them and indirectly increase their loyalty. Normally, the customer will choose the financing products and services that give better benefits and higher return. However, most of them especially Muslims sometimes have low knowledge in knowing the differences between the operation in conventional and Islamic banking. They have similar perception towards Islamic banking products and services which they think the products and services offered are identical or just same to the conventional banking. While, the notable difference is Islamic banking products and services complied with Shariah Law that based on profit and loss sharing between customers and bank whereas conventional banks are heavily operated on interest-based charges. Thus, Islamic banks must come with a creative solution to find the best strategies in order to develop and maintain the long-term relationships with existing customers and at the same time attract new customers. Their relationship with customers is best described as a long-term corporate sustainability and success. Owing to that, it is important to understand what factors affecting their loyalty as this could significantly help Islamic banks design better strategy to sustain in challenging todays' business environment.

LITERATURE REVIEW Customer Loyalty
Customer loyalty is the result of consistently positive experience and satisfaction on products or services. In banking industry, research proven that the consistent commitment of the customer that repeatedly choose the same banks' services and products perceived to have the loyalty value (Amin & Isa, 2008;Baumann, Burton, Elliott, & Kehr, 2007;Henrique & Matos, 2015;Ladhari et al., 2011;Zeithaml, Berry, & Parasuraman, 1996). Apart from that, by spreading positive feedback whether attitudinal or behavioral will also influence other peoples' loyalty towards services and products (Lee, Lee, & Feick, 2001). In addition, Research by Oly Ndubisi (2006) found that good marketing strategies and better future situation also influence commitment of customer to remain with the same product or vice versa. This also supported by research conducted by Amin & Isa (2008), where they found that it is a must for organisations to employ a person who has effective in marketing strategies because it can help the organisations to understand and delivery the customers' needs in order to sustain the value of loyalty. Meanwhile, according to Oliver & Bearden (1985), customer loyalty is the most important element and significant from previous study for firm to increase their profitability. Research study in organisation behavior indicates customer loyalty leads to several benefit and better company performance, although it is hard to maintain customer which are loyal (Lee et al., 2001;Lewis & Soureli, 2006).

Shariah Compliance
Shariah compliance means there is no speculation activity, no interest rates allowed, and there is no activity that related to the consumption of pork, alcohol, or pornography (Nivoix & Ouchrif, 2016). Recently, the existence of Shariah supervision is essential in order to assist the Islamic Financial Institutions (IFI's) in conducting the Shariah compliant business because due to lack of understanding of Shariah principles among IFI's management (Abbas, Hammad, Elshahat, & Azid, 2015;Saratawi, 2008 & Iqbal (2013), stated that all Islamic financial contracts and transactions must get approval from Shariah board and the contract must minimize the risk of asymmetry information and moral hazard. Shariah experts were highly essential in handling mixture of business or finance professionals to helps in giving opinion from Shariah perspectives, which leads to smooth Islamic policy making (Hanif, 2018).

Service Quality
Service quality as mentioned by Parasuraman & Zeithaml, (2005) is the ideal outcome of a comparison made by a customer between the expectations of a service and the perception of the performance of the service received. Nowadays, service quality for Islamic banking is important because the bank is growing worldwide by offering many product and service to compete with conventional banking (Akhtar & Zaheer, 2014;Rehman, 2012). By improving Islamic banks' products services quality, it leads their market share and profitability to increase higher (Rust & Zahorik, 1993;Wang, Lo, & Hui, 2003). According to Janahi & Al Mubarak, (2017) and Rehman, (2012), service quality become essential dimension for Islamic banking in satisfying their customers expectation. This also supported by Haron, Ahmad, & Planisek, (1994) as their study in Malaysia found that the service quality was the most important factor that influence customers loyalty for the bank.

Product Quality
A product can be considered have quality if it can give and meet customer satisfaction which indirectly generate customer value (Kishada & Wahab, 2013). In addition, Wang et al (2003) define different terms regarding quality where their research mentioned quality being viewed in products attributes for marketing and economics meanwhile in operation management, quality been defined as product having multiple dimensions. Nonetheless, customer or potential customer usually have their own interpretation of product quality because each of them have their own unique taste and it may contribute to subjective assessment of product's worth (Mason, 1974). Customer tend to be loyal with commitment to repurchase or rebuy their preferred products because of the quality of the product itself (Oly Ndubisi, 2006;Ribbink, van Riel, Liljander, & Streukens, 2004). In previous study, Wang et al., (2003) also found that the customers planning to move to another new bank because of the greater variety of bank products. A positive feedback gained from research conducted by Amin &Isa, (2008) andOsman et al., (2009), where their research found out satisfaction from Islamic bank customers increase due to high quality of product and services offered by the bank. In addition to that, Islamic banks that use updated and new technology in delivering their product also one of the factors contribute to satisfaction of customers (Fauzi & Suryani, 2017).

Convenience
According to Saad Andaleeb, Rashid, & Rahman (2016), convenience can increase customer satisfaction by combining several services and activities which leads to less processing time which make it easier for the customers. In addition to that, Berry et al. (2002) has identify five (5) dimension of service convenience which are benefit convenience, post-benefit convenience, decision convenience, transaction convenience and access convenience. Meanwhile, Almossawi, (2001) and Okumus, S., & Genc, (2013) agreed that the factors that increase the convenience of customer to Islamic bank are the location ATM services and it branches which are easily accessible for customer. Apart from that, the researchers also proved that the use of technology also one of the main factors that contribute to customer convinience. On the other side, Iqbal et al., (2018) suggested Islamic banking branches should have separate banking facilities for male and female customers.

Research Hypothesis
Hypotheses for this study can be divided into four (4) as follows: Hypothesis 1: Shariah Compliant and Customers' Loyalty H10: There is no significance relationship between Shariah compliant and customers' loyalty towards Islamic banking. H11: There is a significance relationship between Shariah Compliant and customers' loyalty towards Islamic banking.
Hypothesis 2: Service Quality and Customers' Loyalty H20: There is no significance relationship between Service Quality and customers' loyalty towards Islamic banking. H21: There is a significance relationship between Service Quality and customers' loyalty towards Islamic banking.

METHODS
The target respondent for this study focused on people who resides in Gombak, Selangor. Based on statistical data released by Majlis Perbandaran Selayang, the total number of residents in Gombak, Selangor is about 410,315 peoples. From this, the expected number of peoples who are fit with the criteria to become respondents are 330. Prior to that, the researchers have conducted the pilot study with 30 respondents to evaluate the draft questionnaire to check the structure of constructed questions and also its reliability and validity. Then the questionnaire was revised accordingly, before being distributed out to target respondents. The questionnaire consists of two (2) sections. For the first section refers to demographic section, which covers respondent's details such as gender, age, race, marital status and others. Second part of the questionnaire is based on the dependent and independent variables employed in this study. The questions constructed based on the following scale; 1 = Strongly Disagree, 2 = Disagree, 3 = Moderate, 4 = Agree, 5 = Strongly Agree.

RESULTS AND DISCUSSIONS
A set of 330 questionnaires are given to the respondents in targeted area. Out of the total distributed questionnaires, 320 were returned back from the respondents. This indicates response rate of 93.90%. But 17 questionnaires were discarded as they declared that have no personal relationship with Islamic Banks (refers to Table 2) and lead to final response rate of 91.81% that equivalents to 303 usable questionnaires. This personal relationship with Islamic banking question served as preliminary question asked in the questionnaire form to ensure the respondents must have the personal relationship with Islamic banking. This to warrant the reliability and validity of the data that used in this study.

Profile of Respondents
Demographic factors covered in this study i.e. gender, age, race, marital status, occupation, and the relationship of respondents with Islamic bank. The results discovered that, for gender, majority of respondents are female. Out of 303 respondents, 93 are male respondents and 210 are female respondents. In term of respondent age, this study segregates the respondent into four (4) category. Which is those who age is less than 20 years old, between 21 to 40 years old, between 41 to 60 years old and more than 60 years old. Out of 303 respondents, 25 respondents (8.3%) were fit in to the younger age group which less than 20 years old and 212 respondents (70%) belonged to those age group between 21 to 40 years old. It followed by, 56 respondents (18.5%) belonged to those age group between 41 to 60 years old and lastly, only 10 respondents or (3.3%) was belonged to those who is more than 60 years old.
For race, 271 respondents (89.4%) are Malay. While 15 respondents (5%) respondents are stated similar reading for both from Chinese and Indian races. In term of marital status, we can observe that, 204 respondents (67.35) are single, 96 respondents (31.7%) are married, while only 3 respondents are in divorce status. The respondent's occupation that has been answered by respondents are 34 (11.2%) from government sector, 162 (53.5%) respondents from private sector, 30 (9.9%) respondents from selfemployed, and 77 (25.4%) respondents from others such student, unemployed, pensioner, housewife and others. Based on Table 4, it shows that the Shariah compliant has highest mean value which is 4.30 and the product quality has the lowest mean value which is 4.03. This result indicate that Shariah compliant is an important factor that influence the customer loyalty towards Islamic Banking. In other words, most of the respondents agreed that Shariah compliant is main factor that influenced customers loyalty towards Islamic banking in Gombak, Selangor. The second highest is service quality (Mean =4.24, standard deviation=0.49). Convenience have a mean score 4.13 (standard deviation=0.63) and the lowest mean is product quality with mean 4.03 (standard deviation=0.60). The dependent variable which is customer loyalty have a mean score 4.28 (0.56). Besides that, the standard deviation will compute how spread out around the mean points of distribution are. The result of standard deviation shows the value from 0.49 to 0.63, which the data clusters closely within the mean.

Regression Analysis
As exhibits in Table 5, the R 2 value is 0.522. It indicated that variables employed in this study i.e. Shariah Compliant, Service Quality, Product Quality and Convenience explained 52.20% of the variance. Another 47.80% is explained by other factors that are not included in this study.  Three (3) hypotheses that found have significant relationship on customers' loyalty towards Islamic banking are Shariah Compliant (β = .180, p < .05), Product Quality (β = .291, p < .05) and Convenience (β = .380, p < .05). All these three (3) variables shows they have positive influence and contributed significantly on customers' loyalty towards Islamic banking. However, service quality did not contribute significantly on customers' loyalty towards Islamic banking. This verified by the result as shown in Table 6, Service Quality (β = -.104, p > .05), did not have any influence on customers' loyalty towards Islamic banking at 5% significance level. Based on the results from regression analysis, it suggested that three (3) out of four (4) hypotheses received strong support (reject H0) and only one (1) hypothesis is failed to reject. This can be summarized as Table 8.

CONCLUSION
With the stiff competition exists between Islamic banks and conventional banks, this study can be used as recommendations for Islamic banks to improve their products and services, also craft the better strategy to fulfill need of the customers. In addition, even though this study only focused in one (1)  Plus, the Islamic banks should realize the important of Shariah Compliant factor, as this give significant influence towards customer's loyalty. This because due to growth of Islamic banking in Malaysia, it is expected that newer player will jump to this sector due to strong demand for Shariah compliant financial products and services. This backup by, increasing number of deposits in Islamic banks, it has increase vigorously from year to date. Besides that, Islamic banks also should provide enhance their service quality as it can boost the confidence of new and existing customers. Also, service quality plays important role in retaining customer loyalty and it will lead to long term relationship between customers and Islamic banks. Product quality can be described best as prime driver of overall customer loyalty towards Islamic banks. Customer who traded heavily and had high investable assets will looking for the best Islamic banks that provide a variety of products. Thus, Islamic banks should do the product research to increase their product quality and comes with variety of products offered i.e. deposits option and investment products. Islamic banks also should realize how convenience can be regarded as a factor to increase customer's loyalty towards Islamic banks. Increase in convenience such as Islamic banks provide more ATM services, location of branches and make use of latest technology will ease customers to perform their daily transaction. Other than that, it will lead to competitive advantage for the Islamic banks to provide better and greater coverage of service convenience to their customers.