You want my loyalty? Treat me fairly! A study of Islamic banking customers in South Africa

Abstract

Purpose

The purpose of this study is to investigate possible drivers of loyalty amongst Islamic banking customers in Gauteng, South Africa. We ponder the relationships of service fairness (a secondorder reflective construct) with perceived value, satisfaction, and loyalty.

Design/methodology/approach

Data were obtained from Islamic banking customers in South Africa using interview-administered questionnaires. A total of 350 responses were perceived as being suitable for data analysis. The measurement and structural models were measured through structural equation modelling.

Findings

Service fairness and perceived value were found to be important drivers of loyalty within this context.

Research limitations/implications

This study demonstrates that service fairness and perceived value are precursors to the future loyalty intentions of Islamic banking customers. As such, they should be nurtured as key elements of the relationship building process.

Practical implications

The study guides South African Islamic banks and South African banks with Islamic windows to better understand how service fairness (interactional, procedural and distributive) fosters satisfaction, perceived value and loyalty (attitudinal and behavioural).

Originality/value

Enhancing comprehension of the relationship between service fairness and customer loyalty, with satisfaction and perceived value playing intermediary roles, represents an unexplored avenue in academic research within the context of Islamic banking in an emerging African market.

Citation

Roberts-Lombard, M. and Petzer, D.J. (2024), "You want my loyalty? Treat me fairly! A study of Islamic banking customers in South Africa", Journal of Islamic Marketing, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIMA-06-2023-0178

Introduction

Customers’ perceptions of service fairness are imperative for banks developing long-term relationships with customers. Marketing scholars (Farooq and Moon, 2020; Narteh, 2016) have confirmed the important role played by service fairness in forming long-term relationships with customers. These authors validated the impact of service fairness on banking customers’ decision to remain loyal to their banks. They argued that a positive service fairness perception in a banking context is strengthened when banks treat their customers with the required courtesy and respect, when employees engage with banking customers in a timely and professional manner through open and engaging communication, and when banks are understanding of customers’ service needs. As such, customers developing a negative service fairness perception of their experience at a bank are more prone to develop negatively charged perceptions of the bank, which could lower their satisfaction and future loyalty intentions towards their banks (Agnihotri et al., 2022; Leem and Eum, 2021).

The international Islamic banking industry is a substantial role player in the global marketplace, with a total asset value of US$1253bn in 2022. In emerging markets across the globe, the total deposit value at Islamic banks in 2022 was US$198bn (Market Data Forecast, 2022). In South Africa, as an emergent market in Africa, the total deposit value at Islamic banks in 2022 was US$2bn, with advances of US$824m (Onyango, 2022). Despite the prominence of the Islamic banking market in South Africa, research indicates that Islamic banks can further strengthen their competitiveness in the Islamic banking market by developing enhanced knowledge of the service expectations of their customer segments, thereby increasing their ability to enhance customers’ overall satisfaction experience (Moosa and Kashiramka, 2022). This sentiment is supported by studies conducted in emergent business markets, such as Malaysia and Kuwait, establishing that to stimulate the future loyalty of Islamic banking customers, increased knowledge of their service fairness expectations and the effect on their future satisfaction and loyalty intentions requires further exploration (Ghamry and Shamma, 2022; Mohd Thas Thaker et al., 2020).

Service fairness is well researched as a stimulant to the development of enduring relations between Islamic banks and their customers in a service context (Aldaihani and Ali, 2018; Ali and Raza, 2017). Furthermore, service fairness, referred to as a bank’s tangible and intangible ability to deliver on customers’ service needs and expectations, is broadly validated in relationship marketing literature as an important tool to strengthen customers’ future loyalty intentions (Kumar et al., 2022; Ozkan Tektas, 2017). For decades, scholars like Bhatt (2020) and Carr (2007) have called for the need to explore service fairness as a multifunctional variable. These studies have confirmed the importance of service fairness as a variable that can impact an outcome or be impacted by multiple factors when building relationships with customers. This is especially relevant when considering that Islamic banks operate in a highly competitive business environment in South Africa, where their level of interdependence will determine the future survival of the Islamic bank in a competitive and complex banking environment (IOL, 2021). Consequently, service fairness is crucial to securing the future satisfaction and loyalty of Islamic banking customers. As such, the aim of this study is to explore the possible drivers of loyalty amongst Islamic banking customers in South Africa through an in-depth understanding of the relationships of service fairness (a second-order reflective construct) with perceived value, satisfaction and loyalty.

Considering the discussion above, it should be noted that managing service fairness in a proficient manner is a key requirement in delivering services to customers, which directly impacts customers’ overall satisfaction experience and future loyalty behaviour (Min et al., 2020). Moreover, it is difficult to exactly predict the service delivery ability and service engagement potential of employees. Consequently, research into the relationships between service fairness, its selected antecedents and outcomes (satisfaction, perceived value) and ultimately loyalty is needed to enhance the viable nature of Islamic banks in South Africa, where competition is rife. To attend to this research gap, this study applies fairness and relationship marketing theories to the proposed model (Nurudin and Ratnawati, 2022; Roy et al., 2015).

The study makes numerous theoretical and practical contributions. Theoretically, the results can explicate the significance of fairness and relationship marketing theories towards service fairness, its antecedents and outcomes. Furthermore, the intervening role of satisfaction and perceived value on the relationship between service fairness and loyalty is investigated. Conclusively, the study proposes a model that will confirm the interrelationships between the precursors and outcomes of service fairness in the South African Islamic banking industry. Managerially, the study guides South African Islamic banks and South African banks with Islamic windows to better understand how service fairness (interactional, procedural and distributive) fosters satisfaction, perceived value and loyalty (attitudinal and behavioural). In addition, the study assists banks in developing enhanced knowledge of how satisfaction and perceived value function as intervening variables in the relationship between service fairness and loyalty.

This paper starts with a brief overview of the context within which the study is set. This is followed by an orientation towards the problem to be explored, the current standing of the Islamic banking industry in South Africa as well as the two theories grounding the study. Flowing from this is the theoretical validation of the proposed hypotheses, the research methodology applied to the study, the research results as well as the theoretical and managerial implications for the study.

Literature review

The South African Islamic banking industry

In the South African Islamic banking industry, the largest banking brands in the country offer Islamic banking products and services (i.e. Al Baraka Bank, Absa, First National Bank [FNB], Standard Bank and HBZ Bank). By March 2021, Islamic banking assets represented 16% of South Africa’s total banking assets. Islamic banking deposits grew by 41.5% from 2020 to 2021, while conventional banking only grew by 15.16%. On average, the growth rate of Islamic banking deposits exceeded the growth rate of conventional deposits by almost 30% for 2019–2021. Over the same period, Islamic banking advances and loans grew by 49.7%, while loans and advances in conventional banking grew by only 7.86% (The Banking Association South Africa, 2021; IOL, 2021). South Africans’ growing interest in Islamic banking products is explained by the assurance “that their money is not invested in any companies that engage in morally questionable activities and actions that cause social harm” (IOL, 2021) as well as the state-of-the-art banking solutions being grounded in shariah principles (LoansFind, 2024; News24, 2022).

Considering the discussion above, it should be noted that South Africa’s Islamic banking industry includes the participation of established brands that create high levels of competitiveness in the market. Consequently, the ability to deliver customers’ service expectations with the required professionalism and engagement has become a differentiating factor in the reinforcement of customers’ overall satisfaction experience and value perceptions with service providers, potentially stimulating future loyalty intentions (LoansFind, 2024). This has been confirmed by scholars such as Zeitun and Anam (2024). Yet, this affirmation needs further exploration regarding the South African Islamic banking industry and the degree to which service fairness contributes to satisfaction, perceived value and loyalty intention.

Fairness and relationship marketing theories underpinning the study

Fairness theory is founded on three major fairness dimensions:

1. distributive fairness concerning the distribution of outcomes;

2. procedural fairness relating to the procedures followed to deliver on outcomes; and

3. interactive fairness regarding interpersonal engagement in terms of outcome delivery (Greenberg, 2001; Hapsari et al., 2020).

According to Shapiro (2001), it is unlikely all three dimensions of fairness will be equally involved, in any given scenario, when an individual develops a perception of fairness based on specific circumstances. This is especially true because an individual customer develops a holistic analysis of the service experience, based on circumstances at the time, to develop a fairness perception (Ambrose and Arnaud, 2005; Ambrose and Schminke, 2009). Therefore, within a service scenario, distributive justice encompasses customers’ perceptions of what is being received once a service recovery has been secured. Procedural and interactive fairness is perceived more as a moderator of the outcome fairness (Christ-Brendemühl and Schaarschmidt, 2022; Huang et al., 2022). This implies that individuals are more focused on how the outcome was received and not what (in terms of the outcome) was received (Bhatt, 2020; Wang et al., 2021).

For years, relationship marketing scholars have maintained relationship marketing’s significance as an approach to enhance customer commitment through interactive engagement. This is imperative when considering that relationship marketing theory is founded on customer engagement and extensive knowledge of customers’ needs and expectations (Aldaihani and Ali, 2019; Banerjee and Sreejesh, 2022). Rather (2019) concurred, stating that when service providers secure consistent interactions with customers, the latter develop feelings of belonging and a willingness to remain in the relationship. Consequently, relationship marketing is a viable strategy to stimulate consumers’ willingness to commit and thus their future loyalty intentions (Khraiwish et al., 2022).

Considering the above, fairness theory clearly argues that customers’ disapproving service fairness views can be the result of procedural, interactional and distributive justice founded on accountability (McColl-Kennedy and Sparks, 2003). Relationship marketing theory aligns with this, stating that by developing increased knowledge of customers’ service experience needs, banks are empowered to address customers’ service expectations more successfully, thereby stimulating the overall satisfaction experience and future loyalty intentions (Banerjee and Sreejesh, 2022; Wongsansukcharoen, 2022). Consequently, fairness and relationship marketing theories function as supportive foundations to secure the creation of long-standing relations with banking customers in a service environment (Gokmenoglu and Amir, 2021; Sayil et al., 2019).

Service fairness

Multiple scholars have confirmed the multidimensional nature of fairness, consisting of three dimensions: interactional fairness, procedural fairness and distributive fairness (Beugre and Baron, 2001; Farooq and Moon, 2020; Giovanis et al., 2015). Interactional fairness refers to the courtesy, appreciation and thoughtfulness illustrated by the service firm when engaging with customers. It also includes the extent of mutual communication between parties. Procedural fairness encompasses aspects such as fairness, refutability, clarification, understanding and expertise in the service engagement process. Distributive fairness relates to the fair-mindedness of the deliverables of the exchange process (Furwanti et al., 2022; Roy et al., 2015).

Satisfaction

Scholars, such as Mwiya et al. (2022), refer to satisfaction as the extent to which a service meets or exceeds recipients’ expectations in the context in which it is delivered. In this study, satisfaction was assessed as a unidimensional construct that evaluated the overall satisfaction of the bank (also known as cumulative satisfaction). In addition, the assessment of satisfaction in the study concentrated on customer service experience needs, customer service fulfilment needs and customers’ overall service expectations.

Perceived value

Value refers to customers’ perceptions of a product or service performance in comparison to the financial cost incurred for such goods or services (Kaabachi et al., 2022). Moreover, customers’ value perceptions are guided by experiences at a given time, which influence customers’ overall value assessment (Rusmahafi and Wulandari, 2020). For the purpose of this study, perceived value is measured as a unidimensional construct, inclusive of both perspectives (Nyadzayo, 2010). Furthermore, the evaluation of value in the study focused on aspects including benefits and costs, the quality of service being delivered and the worth of staying with the bank.

Loyalty (attitudinal and behavioural)

Multiple marketing scholars have called for the measurement of loyalty as a multidimensional construct, contending that through such an approach, customers’ future loyalty intentions are more successfully measured (Mainardes et al., 2020; Shabbir et al., 2018). Attitudinal and behavioural loyalty have been confirmed as two prominent dimensions used when measuring loyalty in a service-orientated context (Nourallah, 2022; Tegambwage and Kasoga, 2022). Attitudinal loyalty encompasses customers’ future intentions to purchase the product or service again founded on their emotional affection in relation to a product or service (Singu and Chakraborty, 2022). Contrastingly, behavioural intention refers to the motivational factors that stimulate customers to repurchase. These factors guide consumers’ decision to repurchase the product in the future (Dandis and Al Haj Eid, 2022).

For the purpose of this study, loyalty was used as a multidimensional construct that encompasses attitudinal and behavioural loyalty. Both dimensions of loyalty were included in the study to strengthen the overall projective power of loyalty (Bowen and McCain, 2015; Pritchard and Howard, 1997). Conclusively, attitudinal loyalty was measured by focusing on aspects, such as consumers’ preference for, attachment to, belief in and support of the banking brand. Conversely, behavioural loyalty was assessed by considering customers’ willingness to commit to their banks, their longing to be associated with their banks and their bank choice position (Mandhachitara and Poolthong, 2011).

Conceptual model development

Interrelationship between service fairness and satisfaction

Customers will become more satisfied if their overall experience of a service received is based on elements of understanding, mutual respect and reliability (Tabrani et al., 2018). Hafasnuddin and Majid (2022) confirmed that when customers perceive the service received as psychologically, emotionally and economically beneficial, their contentment with the service provider is positively stimulated. This finding is underwritten by Bhatt (2020), arguing that a positive relationship exists between service fairness and satisfaction. Therefore, it is hypothesised that:

H1.

Service fairness has a positive and significant relationship with satisfaction.

Interrelationship between service fairness and perceived value

Scholars, such as Huang and Su (2010) and Wang et al. (2021), have confirmed the direct relationship between service fairness and perceived value. Christ-Brendemühl and Schaarschmidt (2022) stated that when customers perceive a service as fair, experience high levels of positive engagement when interacting with their service provider or believe the economic benefits of remaining in a relationship with their supplier are higher than the costs, they will develop positive value perceptions of their service provider. Consequently, customers’ perceptions of value received are guided by their psychological and economical perceptions of fairness towards their service brand (Hafasnuddin and Majid, 2022; Rahayu et al., 2020). Marcos and Coelho (2022) and Özkan et al. (2020) concurred, affirming that customers’ service perceptions directly impact their perceptions of value received. As a result, the following hypothesis is proposed:

H2.

Service fairness has a positive and significant relationship with perceived value.

Interrelationship between satisfaction and loyalty (attitudinal and behavioural)

The importance of satisfaction as a precursor to customer loyalty has been widely confirmed by marketing studies. In marketing literature, scholars like Farooq and Moon (2020) have strongly argued that the reinforcement of customer loyalty can be secured by addressing customers’ service fairness expectations. Furthermore, Hafasnuddin and Majid (2022) contended that customers’ overall contentment is guided by the psychological and economic benefits received when engaging with a service provider (Ganaie and Bhat, 2020; Ramadonna et al., 2019). These benefits could include the ease of engagement with employees, the effortlessness to interact with the service provider, reduced account costs or the provision of guidance to problems experienced (Roy et al., 2018). Through such an approach, customers’ satisfaction is enhanced, stimulating their future loyalty intentions (Haron et al., 2020). Consequently, it is hypothesised that:

H3.

Satisfaction has a positive and significant relationship with loyalty.

Interrelationship between perceived value and loyalty (attitudinal and behavioural)

The views of banking customers in terms of value received from engaging with their banks is a key driver of customers’ willingness to develop a long-term relational orientation with their banks (Mainardes and Freitas, 2023). In their banking study conducted in Turkey, Özkan et al. (2020) ascertained that bank customers’ future loyalty is strengthened when banks deliver on customers’ need for value. Therefore, when customers believe their banks offer value for money through high-quality service delivery, memorable engagement experiences and financial benefits, they will reflect a stronger intent to remain in the relationship (Fusva et al., 2020). Considering the discussion above, it is hypothesised that:

H4.

Perceived value has a positive and significant relationship with loyalty.

Mediating influence of satisfaction in the relationship between service fairness and loyalty (attitudinal and behavioural)

Satisfaction is extensively validated as a mediator between precursors and loyalty in the field of marketing. For example, a study on Islamic banking in Tanzania (Rahman, 2016) established that when customers are satisfied, their future loyalty intentions are strengthened. Research in Indonesia’s Islamic banking industry has confirmed satisfaction as a mediator, influencing bank customers’ future loyalty (Bachri et al., 2022). Therefore, if banks can become more understanding of customers’ service fairness expectations and develop strategies to deliver on such expectations more successfully, overall customer satisfaction is enhanced, thereby strengthening customers’ future loyalty intentions (Devi and Yasa, 2021; Hossain et al., 2021). Against this background, the following hypothesis is proposed:

H5.

Satisfaction mediates the relationship between service fairness and loyalty.

Mediating influence of perceived value in the relationship between service fairness and loyalty (attitudinal and behavioural)

Substantive literature (Bashir et al., 2020; Özkan et al., 2020) in a banking setting has investigated the mediating role of perceived value in a financial services context. Fusva et al. (2020) stated that the value perception a customer develops of a bank is imperative for securing future intention to be loyal. Consequently, when a bank customer perceives the relationship with a bank to be beneficial (psychologically and economically), the intent to remain in the relationship in the future is strengthened (Fianto et al., 2020). Furthermore, Aye and Soe (2020) and confirmed the mediating role of perceived value in a banking setting stating that when a bank offers their customers quality products and services at reasonable costs, their overall perception of value received is increased. Therefore, retail banking customers can perceive doing business with their bank as being the right decision, ultimately stimulating their future loyalty intention, when the benefits received exceed the costs to remain in a relationship with their bank (Langat et al., 2021). Considering this, it is hypothesised that:

H6.

Perceived value mediates the relationship between service fairness and loyalty.

Based upon the discussion, the model in Figure 1 is proposed.

Research methodology

Sample selection and data collection

The study targeted Islamic banking customers in South Africa’s Gauteng province who were at least 18 years of age and had an Islamic banking account with a retail bank in South Africa. A purposive non-probability sampling technique was used to select the respondents who partook in the study (Amin, 2021). Trained fieldworkers employed by a field services company were used to identify prospective respondents and to collect data from qualifying respondents in the Muslim community in South Africa’s Gauteng province. Prospective respondents were approached based upon judgement, with screening questions being used to ensure they met the requirements to partake in the study. Data were collected from the respondents using interviewer-administered questionnaires. The questionnaire consisted of a consent statement, followed by screening questions. The questionnaire further collected data on respondents’ demographics and Islamic banking patronage. Subsequently, the study’s key constructs were measured. The data were edited and cleaned before being analysed.

Data from 350 completed questionnaires were analysed of the respondents participating in this study, 50.3% were female, aged older than 55 (34.6%), had a post-school qualification (47.7%) and were English speaking (91.7%). Furthermore, majority of respondents were full-time employed (40%), married or living with a partner (76%), had most of their Islamic bank accounts with FNB (58.3%) for a period of seven years or less (51.1%) and had predominantly a savings account (61.4%) with their bank at an average cost of R150 per month or less (54.6%) (Table 1).

Construct measurement

The researchers used a seven-point Likert-type scale to assess the study’s key constructs, where 1 represented “strongly disagree” and 7 represented “strongly agree”. The scales used in the study were obtained from previously published research – the measures for service fairness and satisfaction were adopted from Giovanis et al. (2015), perceived value from Nyadzayo (2010) and loyalty (both attitudinal and behavioural) from Mandhachitara and Poolthong (2011). These scales are reflected in below Items adopted to measure the key constructs of the study:

Items

1. Service fairness (Giovanis et al., 2015)

   • Interactional fairness

     • - My bank treats me with courtesy.

     • - Staff at my bank are ready to answer my questions.

     • - Staff at my bank are enthusiastic or eager to resolve my problems.

     • - I am treated with respect by my bank.

   • Procedural fairness

     • - I receive service in a very timely manner at my bank.

     • - The service procedures of my bank are reasonable.

     • - Staff at my bank provide me with information that was clear and understandable.

   • Distributive fairness

     • - My bank serves me correctly.

     • - My bank provides me with what I ask.

     • - The charges/service fees/costs of my bank are reasonable for the service I receive.

2. Satisfaction (Giovanis et al., 2015)

   • I am satisfied with my experiences with my bank.

   • I am satisfied with my bank overall.

   • My experiences with my bank have exceeded my expectations.

3. Perceived value (Nyadzayo, 2010)

   • My bank offers me value for money.

   • Doing business with my bank is the right decision when price and other costs are.

   • Doing business with my bank is the right decision when the overall quality of se.

   • Compared to the quality of bank service that I get, I pay a reasonable price.

4. Loyalty (Mandhachitara and Poolthong, 2011)

   • Attitudinal loyalty

     • - I say positive things about my bank.

     • - I always consider my bank as my first choice.

     • - I consider myself to be a loyal patron of my bank.

   • Behavioural loyalty

     • - I will definitely keep using this bank.

     • - I will use this bank the next time I need a new service.

     • - I will do most of my banking with this bank.

Source: Researchers’ own construct.

Data analysis strategy

To test the direct effects of this study, the researchers used Mplus (version 7.4). The data’s univariate normality based upon the measured items was inspected using Kolmogorov–Smirnov and Shapiro–Wilk tests. This assessment provided guidance with respect to the ideal estimator to estimate the models of the study. According to Muthén and Muthén (2017), in instances where data do not exhibit univariate normality, the maximum likelihood method (MLM) parameter estimator can be used and where the data do exhibit univariate normality, the maximum likelihood may be used. Because service fairness resembles a second-order construct consisting of three first-order dimensions (i.e. interactional fairness, procedural fairness and distributive fairness), a pair of measurement models were initially examined. The Bayesian information criteria (BIC) were then judged against each other to uncover the model with the superior fit. The first model included the correlated dimensions as first-order reflective constructs; and in the second model, service fairness was assessed as a second-order reflective construct with three dimensions inherent to service fairness as indicators. The model that exhibits the smallest BIC is the model with the better fit. The next step was to undertake a confirmatory factor analysis to evaluate the model with the better model fit (as determined during the previous step) with respect to its psychometric properties. Furthermore, the composite reliability (CRs) and Cronbach’s alpha values (ideally both need to exceed 0.7) were determined to judge the reliability of the study’s measures (Bagozzi and Yi, 1988; Hair et al., 2014). The factor loadings of each construct’s items were evaluated to ensure they exceeded 0.7 (two-tailed p-value < 0.01) to consider convergent validity (Hair et al., 2014) and to guarantee the average variance extracted (AVE) for the constructs met the 0.5 cut-off. Discriminant validity was assessed by determining whether the square root of the AVE of every construct surpassed its correlation with the other constructs (Fornell and Larcker, 1981). To assess the model fit for the measurement and structural models, four fit indices were used:

1. the Satorra–Bentler χ²/df ratio (< 3);

2. the root mean square error of approximation (RMSEA) (< 0.08);

3. the standardised root mean square residual (SRMR) (< 0.08); and

4. the comparative fit index (CFI) (> 0.9) (Hu and Bentler, 1999; Muthén and Muthén, 2017).

Once the direct effects (H1 to H4) were evaluated, the indirect effects (H5 and H6) were assessed using the Hayes Process Macro for SPSS. The Model 4 template was used to conduct the mediation analysis, as the authors were guided by theory to motivate why satisfaction and perceived value might mediate the relationship between service fairness and loyalty. Bootstrapping estimation with 5000 resamples was undertaken and led to the generation of 95% bias-corrected confidence intervals (BCCIs). Thereafter, the BCCIs were examined to see if a zero was present between lower- and upper-level confidence intervals (LLCIs and ULCIs) for indirect and direct effects. Determining the nature of the mediation was guided by the work of Zhao et al. (2010).

Results

Assessing the normality of the data

The data did not exhibit univariate normality. Therefore, the MLM estimator was best suited to estimate the study’s models, as this estimator generates parameter estimates with a mean adjusted Satorra–Bentler chi-square statistic and standard errors that withstand non-normal data (Muthén and Muthén, 2017).

Service fairness as a second-order construct

The BIC for the first model included interactional, procedural and distributive fairness as first-order reflective constructs (BIC = 6877.307). In the second model, service fairness was tested as a second-order reflective construct. Its three underlying dimensions, namely interactional, procedural and distributive fairness (BIC = 6870.076), were used as indicators. Comparing these results, the second model had a smaller BIC, which is indicative of service fairness being a second-order construct reflective of three first-order factors, thus service fairness was treated as such in assessing the measurement and structural models of the study.

Assessing the measurement model of the study

The measurement model exhibits sound evidence of CR and internal consistency reliability and convergent validity (Table 2). The CR and Cronbach’s alpha values were all above 0.7. With respect to convergent validity, the factor loadings for all the items used to measure the key constructs of the study exceeded 0.7 (two-tailed p-value < 0.01) and the AVE for each construct was above 0.5.

Table 3 provides proof of discriminant validity, because the square root of the AVE of every construct exceeds its correlation with the other constructs (Fornell and Larcker, 1981).

From the model fit statistics, it was evident that the data fit the model reasonably well: Satorra–Bentler χ²/df ratio = 2.89, RMSEA = 0.075, CFI = 0.935 and SRMR = 0.041. Consequently, the structural model could be assessed.

Assessing the study’s structural model

The structural model fitted the data rather well, except for the Satorra–Bentler χ²/df ratio, which was marginally above the cut-off point at 3.01 – RMSEA = 0.077, CFI = 0.930 and SRMR = 0.046. Table 4 presents the findings concerning the structural model. As per Table 4, service fairness has positive and significant relationships with satisfaction (β = 0.887; p < 0.01) and perceived value (β = 0.852; p < 0.01), satisfaction has a positive and significant relationship with loyalty (β = 0.309; p < 0.01), and perceived value has a positive and significant relationship with loyalty (β = 0.565; p < 0.01). Therefore, H1 to H4 were supported. The results proved that service fairness and perceived value were important drivers of loyalty within this context.

Mediation analysis

Table 5 presents the results for two hypotheses (H5 and H6) related to the indirect effects. Satisfaction mediates the relationship between service fairness and loyalty (0.501; 95% BCCI [0.339; 0.660]) and perceived value mediates the relationship between service fairness and loyalty (0.520; 95% BCCI [0.391; 0.658]). Based upon guidelines provided by Zhao et al. (2010), partial mediation is evident in these cases. Therefore, H5 and H6 were supported.

Discussion

In a competitive business environment, such as the South African Islamic banking industry, an in-depth understanding of banking customer behaviour can strengthen competitiveness in the marketplace. Since the dawn of democracy in South Africa in 1994, banking customers have been provided with more choice of Islamic banking service providers, putting pressure on such service providers to deliver on customers’ continuous evolving satisfaction and value expectations (IOL, 2021). The results of this study validate service perception as a critical element in driving customers’ future satisfaction. Scholars such as Lubis et al. (2021) and Ahmed et al. (2022) concur stating that a customer’s perception of service courtesy, timeliness and ability to address their banking needs do stimulate their overall satisfaction experience with their bank. As such, Islamic banking customers in South Africa expect their banks to manage their expectations in a fair and understanding manner, where engagement is founded on integrity, reliability and courtesy. Through professional service engagement, Islamic banks illustrate a willingness to address customer queries fast and efficiently. Scholars such as Gunawardane (2023) and El Mallouli and Sassi (2022) concur stating that when bank customers experience timely and efficient service delivery that are based on the service expectations of such customers, their overall satisfaction and value perception of their bank is enhanced. Moreover, by reflecting an eagerness to resolve customer problems through a solution-driven approach, Islamic banks can positively impact customers’ service experience perceptions, which can enhance overall satisfaction and value perception in the long term. This finding aligns with a study conducted in Vietnam that illustrates the importance of professional service management in securing overall customer satisfaction in a service-orientated environment (Dang and Pham, 2020). Hoque et al. (2022) also concur stating that when the Islamic values of the bank are reflected through their service engagement strategy (such as service fairness when dealing with customers by being reliable, honest and operating with integrity), an offering banking products and services that are aligned to the changing needs of Islamic banking customers, the latter illustrate increased levels of satisfaction.

Furthermore, the overall management of service fairness in a service context has become a competitive differentiator for banks in Islamic banking (Furwanti et al., 2022). Consequently, the results of this study infer that Islamic banking customers’ service fairness perceptions are guided by multiple factors, including: how understanding Islamic banks are to the changing service needs of their customer base; the speed of response secured on a service engagement enquiry; and employees’ knowledge of products and services offered by the banks. In the marketing literature, scholars such as Abbas et al. (2020) and Alzoubi et al. (2020) concurs with the results from this study by stating that the service fairness perception of Islamic banking customers is crucial to their future satisfaction. As such, Islamic banks are required to deliver a service experience to customers that are reflective of respectful engagement, clear communication delivered in a timely manner and service levels that are aligned to bank charges for such service deliverables.

This in-depth knowledge of customer expectations will better position banks to manage customer service and product expectations through innovative and transformative service offerings that serve the target market with greater accuracy and timeliness. Additionally, a deeper understanding of customers’ changing needs in terms of service and product expectations will allow banks to more successfully secure customer satisfaction and enhance service delivery through its offerings. This outcome aligns with the findings of Rahman et al. (2023), who stated that Islamic banking customers want their banks to understand their changing service and product needs and to have empathy in terms of the service management process. Furthermore, Hosen et al. (2021) and Yusfiarto et al. (2023) concur stating that by offering value through innovative service management strategies that are solution-driven stimulates overall customer satisfaction, which is critical for Islamic banks operating in a competitive industry.

Service differentiation through professional service management is critically important for the future survival of Islamic banks in South Africa because multiple competitors are offering similar product and service offerings in the country (Clark, 2023; Moosa and Kashiramka, 2022). As such, the results of the study established that when Islamic banking customers are satisfied with their experiences at their bank, they will continue to use the services of their bank. In this study, satisfaction has been confirmed an important precursor to loyalty, and that by securing an overall positive service and product experience, customer’s value perception will increase, stimulating their future intention to remain loyal to their bank. Khan et al. (2023) concurred, stating the more customers develop an intimate relationship with their bank, the more they will develop a positive validation to remain with their bank in the future. Islamic banking customers want their bank to continuously engage with them through multiple platforms, thereby illustrating an interest to communicate with the customer. Also, these customers want their bank to provide them with affordable and accessible products and services, that supports their need for convenience, ease of access and affordability. Through such an approach, Islamic banking customers perceive the relationship with their bank to be intimate and accommodating that is characterised by mutual understanding of the needs and expectations of both customer and service provider. As such, the future loyalty of Islamic banking customers is impacted by their overall level of satisfaction and value perception of services and products received (Marcos and Coelho, 2022; Mulia et al., 2021).

Theoretical and managerial implications

Theoretical implications

Deeper understanding of service fairness as a precursor to strengthen the satisfaction and value perception of customers.

The results of the study validate the interrelated nature of the relationships between service fairness, satisfaction and perceived value. Knowledge of these direct relationships is significant, since it has inferences for marketing theory. Both satisfaction and value perception of Islamic banking customers are guided by their service fairness perceptions. Such perceptions are guided by a deep sensitivity towards how fairly customers experience engagement with their banks as financial service providers; whether the procedures followed when engaging is secured and perceived as fair, reliable and transparent; and whether the products and services provided to customers are founded on a deep understanding of the product and service needs of the customer segment (Aravik et al., 2022; Roy et al., 2018). Therefore, if customers are treated with the required courtesy and are managed in a professional manner reflective of efficient time management and the fast resolution of enquiries and complaints, if the financial benefit of staying in a relationship with the bank exceeds the cost and if the quality of service engagement creates a feeling of attachment and association, customers’ overall level of satisfaction is increased and their observations of value received from their relationship with their Islamic banks are enhanced (Asnawi and Setyaningsih, 2021; Iqbal et al., 2018).

Enhanced knowledge of the role of satisfaction and perceived value in nurturing customer loyalty.

The study’s results confirm the relationships between satisfaction, perceived value and loyalty in Islamic banking in an emergent market context. The findings agree with the outcome of studies by Aisyah (2018), Asnawi et al. (2020) and Rahayu et al. (2020), establishing that satisfaction and perceived value are precursors to loyalty in multiple contextual settings. Interestingly, a study of the Islamic banking industry of Indonesia confirmed the direct relationship between satisfaction and loyalty (Purnama et al., 2021). Khan et al. (2023) concurred, stating that a positive and significant relationship between satisfaction and loyalty is evident in the Islamic banking industry. Furthermore, Fauzi and Suryani (2019) confirmed the importance of perceived value as a driver of loyalty in Indonesia’s Islamic banking industry. Fianto et al. (2020) supported this finding, stating that customers’ value perceptions are imperative to strengthening their future loyalty intentions. Islamic banking customers want to have positive and stimulating experiences with their banks that are founded on interactive engagement through multiple platforms, integrity, honesty and mutual respect.

A perspective on satisfaction and perceived value in mediating the service fairness-loyalty link.

The study validates the partial mediation role of satisfaction and perceived value in the service fairness-loyalty relationship. Multiple scholars (e.g. Prasetyo et al., 2021; Stavrianea and Kamenidou, 2022) have confirmed that satisfaction and perceived value are important factors that could enhance customers’ loyalty intentions in multiple contexts (e.g. online food delivery, Islamic banking and tourism). They further stated that a deeper understanding of the role of satisfaction and perceived value in the service fairness-loyalty relationship is required to confirm their role as loyalty stimuli. Accordingly, Islamic banks need to develop enhanced knowledge of the dual importance of satisfaction and perceived value as key drivers of customer loyalty in the future. Through such an understanding, service providers like Islamic banks will be better empowered to deliver on customers’ service and product needs, which will improve their overall service experience perceptions when engaging with their banks.

Practical implications

From a practical viewpoint, it becomes evident that Islamic banks need to first, enhance the service fairness-loyalty link by realising strategies that will enhance customers’ overall satisfaction level and positively stimulate their perceptions of the value received from their Islamic banks. For example, Islamic banks should stay in touch with their customers through continuous engagement on multiple platforms to illustrate an interest in the customers as individual banking customers. Secondly, these banks should communicate regularly with customers on their individual product and service expectations that could improve customers’ service delivery expectations.

Thirdly, Islamic banks should become more actioned on customer research to develop an enhanced understanding of the service deliverables required by customers. This can be done by actioning research among Islamic banking customers across all touchpoints (e.g. in the retail banking branch, through banking websites or banking apps). Through such research, Islamic banks can obtain information on how to treat customers more successfully with the professionalism, efficiency and fairness required by customers when engaging with their banks.

Fourthly, banks can communicate shariah compliance banking practices through multiple in-house and online platforms to soften customer concerns on the trustworthiness of the banks’ businesses practices. Finally, Islamic banks need to be flexible in their banking service delivery by offering customers multiple channels for engagement. Such channels (e.g. chatbots, live chat agents, mobile phone access through a banking app, email, SMS, WhatsApp/Facebook Messenger support and social media) should be offered to customers as service engagement options and should be strongly supported by an effective and professional in-house and online service team that could deliver on after-sales service expectations with the required timeliness, efficiency and reliability. Fifthly, customers’ overall level of satisfaction and value perceptions are strengthened when customers: are acknowledged during each point of access or during each form of engagement with their bank; have ease of access to banking branches or technological banking support portals, such as websites and applications, when conducting their banking; are professionally managed through friendly service delivery; and are competently guided at each step of the service interaction process (in house or online). Such actions can stimulate Islamic banking customers’ willingness to stay loyal to their banks in the future, thereby enhancing the banks’ overall profitability (Rahayu et al., 2020).

Conclusively, banks should identify and professionally manage service friction points that could address service fairness issues in a timely manner through engagement and proactive solution-driven processes. The latter can be face-to-face interaction through in-house service resolution actions or online service support through chatbots or a 24 / 7 call centre assistance support centre. Banks should also customise the service journey through ease of use and engagement. This implies that Islamic banks should have a centralised service point inside branches for ease of access and interaction. In terms of online banking, Islamic banks should ensure that accessing Islamic banking services online (through a website or banking app) is fast and efficient. Islamic banks should use clear and focused service prompts to illustrate the online service interaction process and use artificial intelligence (AI) tools, such as chatbots, to assist customers with queries, wanting to complete their online banking outside of formal banking hours. The service application of AI tools can also be implemented by Islamic banks to differentiate what callers want when they ask the same questions in multiple contexts. Through such an approach, customers’ overall service engagement experiences can be stimulated.

Conclusively, Islamic banks can improve the overall service delivery experience of customers by making all forms of engagement personalised (i.e. using the name and surname of the customer when interaction is secured), ensuring that employees engage with customers through personal acknowledgement, engagement that is built on dignity and respect and responding to customer enquiries in a timely manner through multiple platforms, such as email, social media, telephone or interpersonal communication guided by the Islamic banking vision of the respective banking brand. In addition, Islamic banks can deliver an after-sales service support to their customers that is built on polite service interaction. The latter needs to reflect employees’ empathetic inclination towards the needs, expectations and concerns of Islamic banking customers. To secure this, Islamic banks need to ensure their staff are consistently trained in service-related aspects, such as consideration, compassion, knowledge, emotional intelligence and the principles of professional service delivery. This can guide Islamic banks towards the building and management of an interactive engagement with customers that is founded on the principles of trustworthiness, sincerity and an intent to provide a supportive service through personalised interaction.

Conclusion, limitations and directions for future research

The study determined that positive and significant relationships exist between satisfaction, perceived value, service fairness (antecedent) and loyalty (as an outcome) if Islamic banking customers are satisfied with the products, services and experience offered by their banks, if their banks provide both psychological value through acknowledgement and respect when engaging, as well as economic benefits that stimulate an intention to remain with their banks. Therefore, the results from this study clearly contribute to developing an improved understanding of the service fairness needs of Islamic banking customers in an emerging market, which could stimulate satisfaction and future loyalty intentions.

In terms of limitations, the research study only explored service fairness as a precursor to satisfaction and perceived value. Furthermore, the selection of the sample for the study was secured through purposive sampling. This form of sampling represents a non-probability sampling technique, which impairs generalisation of the findings of the study. In terms of future studies, a qualitative exploration of the selected antecedents to loyalty can be considered to explore the proposed model in both an established and emergent market or select new proposed mediators to investigate the service fairness-loyalty link. Moreover, future studies could include variables related to the Islamic banking system, such as the environment, regulations and product types, to allow for multi-group analysis and as potential moderators. Future studies can also draw comparisons between customers of different banking systems to uncover how the tested models may differ between various customers.

Figures

Figure 1.

The study’s conceptual model

Table 1.

Profile of respondents

Variable	Count	%
Gender Female Male	176 174	50.3 49.7
Age 25 to 40 years of age 41 to 55 years of age Older than 55 years of age	118 111 121	33.7 31.7 34.6
Highest level of education Some schooling High school completed Post-school qualification	65 118 167	18.6 33.7 47.7
Employment status Self-employed Full-time employed Part-time employed Other (housewife, house husband, student, retired or unemployed)	112 140 28 70	32.0 40.0 8.0 20.0
Home language Afrikaans English Preferred not to say	25 321 4	7.1 91.7 1.1
Marital status Single Married/living with partner Living with parents Divorced or separated Prefer not to say	29 266 18 24 13	8.3 76.0 5.1 6.9 3.7
Bank with which most accounts are held FNB ABSA Standard bank Al barakah HBZ	204 49 28 62 7	58.3 14.0 8.0 17.7 2.0
Duration of support Seven years or less More than seven years	179 171	51.1 48.9
Bank charges (monthly) R150 or less More than R150	191 159	54.6 45.4

Source: Researchers’ own construct

Table 2.

Reliabilities and convergent validity

Constructs and items	Estimate	S.E. est.	p-value	AVE	Cronbach’s alpha	CR
Interactional fairness				0.819	0.947	0.948
IIF1	0.913	0.013	0.0001**
IIF2	0.944	0.01	0.0001**
IIF3	0.873	0.015	0.0001**
IIF4	0.889	0.012	0.0001**
Procedural fairness				0.746	0.904	0.898
IPF1	0.806	0.025	0.0001**
IPF2	0.873	0.016	0.0001**
IPF3	0.909	0.014	0.0001**
Distributive fairness				0.778	0.911	0.913
IDF1	0.944	0.009	0.0001**
IDF2	0.909	0.01	0.0001**
IDF3	0.785	0.022	0.0001**
Service fairness				0.899	0.964	0.964
INTER	0.897	0.015	0.0001**
PROCED	0.971	0.01	0.0001**
DISTRIB	0.975	0.011	0.0001**
Satisfaction				0.845	0.944	0.942
ISAT1	0.939	0.014	0.0001**
ISAT2	0.949	0.01	0.0001**
ISAT3	0.868	0.023	0.0001**
Perceived value				0.772	0.934	0.932
IVALUE1	0.866	0.017	0.0001**
IVALUE2	0.889	0.014	0.0001**
IVALUE3	0.906	0.012	0.0001**
IVALUE4	0.856	0.018	0.0001**
Loyalty				0.746	0.947	0.946
IALOYAL1	0.876	0.015	0.0001**
IALOYAL2	0.929	0.01	0.0001**
IALOYAL3	0.781	0.027	0.0001**
IBLOYAL1	0.854	0.017	0.0001**
IBLOYAL2	0.889	0.013	0.0001**
IBLOYAL3	0.845	0.021	0.0001**

Notes:

**Statistically significant at p < 0.01; two-tailed

Source: Researchers’ own construct

Table 3.

Discriminant validity

Construct	Service fairness	Satisfaction	Perceived value	Loyalty
Service fairness	0.948
Satisfaction	0.867	0.919
Perceived value	0.825	0.858	0.879
Loyalty	0.735	0.774	0.814	0.864

Note:

Square root of the AVE on the diagonal

Source: Researchers’ own construct

Table 4.

Standardised estimates

Path			Standardised estimate	S.E. est.	p-value	t-value	Result
Interactional fairness	→	Service fairness	0.897	0.015	0.0001**	59.630	Significant
Procedural fairness	→	Service fairness	0.961	0.010	0.0001**	93.297	Significant
Distributive fairness	→	Service fairness	0.970	0.011	0.0001**	90.273	Significant
Service fairness	→	Satisfaction	0.887	0.012	0.0001**	76.787	Significant
Service fairness	→	Perceived value	0.852	0.020	0.0001**	42.448	Significant
Satisfaction	→	Loyalty	0.309	0.052	0.0001**	5.953	Significant
Perceived value	→	Loyalty	0.565	0.046	0.0001**	12.298	Significant

Notes:

**Statistically significant at p < 0.01; two-tailed

Source: Researchers’ own construct

Table 5.

Mediation analysis

Variables X >> M >> Y	Direct effect [LLCI; ULCI]	Indirect effect [LLCI; ULCI]	Result
Service fairness >> satisfaction >> loyalty	0.383 [0.243; 0.535]	0.501 [0.339; 0.660]	Partial mediation
Service fairness >> perceived value >> loyalty	0.369 [0.240; 0.499]	0.520 [0.391; 0.658]	Partial mediation

Notes:

X = exogenous variable; M = mediating variable; Y = endogenous variable

Source: Researchers’ own construct