Corporate Social Responsibility, Customer Loyalty, and Financial Performance: Empirical Findings from the Islamic Bank

Main Article Content

Muhammad Muflih
Radia Purbayati
Hasbi Assidiki Mauludi


CSR, Loyalty, Financial performance, Stakeholder theory, Islamic bank


Great attention to financial performance is the key to building solid competitiveness in the Islamic banking industry. By exploring the role of Islamic banks in social programs, this study estimated the relationship between CSR (corporate social responsibility) and financial performance, either directly or through the mediating role of loyalty. These paths trace the ability of CSR to create customer support for Islamic banks which then gives birth to positive financial performance. This study surveyed 505 Islamic bank customers. To test the direct and indirect relationships between CSR and the financial performance of Islamic banks, this study employed the PLS (partial least square) method. Empirical estimation results showed that CSR convincingly affects financial performance directly and positively. Meanwhile, indirectly, it can connect positively with financial performance through the mediating role of customer loyalty. This study contributes to the development of stakeholder theory. For the industry, this study contributes to determining the direction of CSR development, which has implications for increasing the organization's public support and financial performance.


Download data is not yet available.
Abstract 226 | pdf Downloads 185


Abu Al-Haija, E., Kolsi, M. C., & Kolsi, M. C. C. (2021). Corporate social responsibility in Islamic banks: to which extent does Abu Dhabi Islamic bank comply with the global reporting initiative standards? Journal of Islamic Accounting and Business Research, 12(8), 1200–1223. doi: 10.1108/JIABR-11-2020-0346

Al-Malkawi, H. A. N., & Pillai, R. (2018). Analyzing financial performance by integrating conventional governance mechanisms into the GCC Islamic banking framework. Managerial Finance, 44(5). doi: 10.1108/MF-05-2017-0200

Alam, M. M. D., Babu, M. M., Noor, N. A. M., Rahman, S. A., & Alam, M. Z. (2020). Millennials’ preference of hedonic value over utilitarian value: Evidence from a developing country. Strategic Change, 29(6), 649–663. doi: 10.1002/jsc.2380

Aramburu, I. A., & Pescador, I. G. (2019). The Effects of Corporate Social Responsibility on Customer Loyalty: The Mediating Effect of Reputation in Cooperative Banks Versus Commercial Banks in the Basque Country. Journal of Business Ethics, 154(3), 701–719. doi: 10.1007/s10551-017-3438-1

Bardos, K. S., Ertugrul, M., & Gao, L. S. (2020). Corporate social responsibility, product market perception, and firm value. Journal of Corporate Finance, 62, 101588. doi: 10.1016/j.jcorpfin.2020.101588

Baron, R. M., & Kenny, D. A. (1986). The Moderator-Mediator Variable Distinction in Social Psychological Research. Conceptual, Strategic, and Statistical Considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182. doi: 10.1037/0022-3514.51.6.1173

Belasri, S., Gomes, M., & Pijourlet, G. (2020). Corporate social responsibility and bank efficiency. Journal of Multinational Financial Management, 54, 100612. doi: 10.1016/j.mulfin.2020.100612

Bhattacharya, C. B., Korschun, D., & Sen, S. (2009). Strengthening stakeholder-company relationships through mutually beneficial corporate social responsibility initiatives. Journal of Business Ethics, 85(SUPPL. 2), 257–272. doi: 10.1007/s10551-008-9730-3

Bukhari, S. A. A., Hashim, F., Amran, A. Bin, & Hyder, K. (2020). Green Banking and Islam: two sides of the same coin. Journal of Islamic Marketing, 11(4), 977–1000. doi: 10.1108/JIMA-09-2018-0154

Chang, Y. H., & Yeh, C. H. (2017). Corporate social responsibility and customer loyalty in intercity bus services. Transport Policy, 59(October 2016), 38–45. doi: 10.1016/j.tranpol.2017.07.001

Chi, C. G., & Gursoy, D. (2009). Employee satisfaction, customer satisfaction, and financial performance: An empirical examination. International Journal of Hospitality Management, 28(2), 245–253. doi: 10.1016/j.ijhm.2008.08.003

Chin, W. W., Peterson, R. A., & Brown, S. P. (2008). Structural equation modeling in marketing: Some practical reminders. In Journal of Marketing Theory and Practice (Vol. 16, Issue 4, pp. 287–298). doi: 10.2753/MTP1069-6679160402

Dandis, A. O., & Wright, L. T. (2020). The effects of CARTER model on attitudinal loyalty in Islamic banks. International Journal of Quality and Service Sciences, 12(2), 149–171. doi: 10.1108/IJQSS-03-2019-0050

Edbiz Consulting. (2020). Islamic Finance Country Index-IFCI 2019. Global Islamic Finance Report 2019.

Eklof, J., Podkorytova, O., & Malova, A. (2020). Linking customer satisfaction with financial performance: an empirical study of Scandinavian banks. Total Quality Management and Business Excellence, 31(15–16), 1684–1702. doi: 10.1080/14783363.2018.1504621

Freeman, S., & Cavusgil, S. T. (1984). Strategic management. A stakeholder approach. Journal of International Marketing, 15(4), 1–40.

Fusva, A., Dean, D., Suhartanto, D., Syarief, M. E., Arifin, A. Z., Suhaeni, T., & Rafdinal, W. (2020). Loyalty formation and its impact on financial performance of Islamic banks – evidence from Indonesia. Journal of Islamic Marketing. doi: 10.1108/JIMA-12-2019-0258

García-Madariaga, J., & Rodríguez-Rivera, F. (2017). Corporate social responsibility, customer satisfaction, corporate reputation, and firms’ market value: Evidence from the automobile industry. Spanish Journal of Marketing - ESIC, 21(S1), 39–53. doi: 10.1016/j.sjme.2017.05.003

Ghaderi, Z., Mirzapour, M., Henderson, J. C., & Richardson, S. (2019). Corporate social responsibility and hotel performance: A view from Tehran, Iran. Tourism Management Perspectives, 29(May 2018), 41–47. doi: 10.1016/j.tmp.2018.10.007

Gold, A. H., Malhotra, A., & Segars, A. H. (2001). Knowledge management: An organizational capabilities perspective. Journal of Management Information Systems, 18(1), 185–214. doi: 10.1080/07421222.2001.11045669

Gürlek, M., Düzgün, E., & Uygur, S. M. (2017). How does corporate social responsibility create customer loyalty? the role of corporate image. Social Responsibility Journal, 13(3), 409–427. doi: 10.1108/SRJ-10-2016-0177

Hair, J. F., Sarstedt, M., Hopkins, L., & Kuppelwieser, V. G. (2014). Partial least squares structural equation modeling (PLS-SEM): An emerging tool in business research. In European Business Review. doi: 10.1108/EBR-10-2013-0128

Harun, M. S., Hussainey, K., Mohd Kharuddin, K. A., & Farooque, O. Al. (2020). CSR Disclosure, Corporate Governance and Firm Value: a study on GCC Islamic Banks. International Journal of Accounting and Information Management, 28(4), 607–638. doi: 10.1108/IJAIM-08-2019-0103

Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115–135. doi: 10.1007/s11747-014-0403-8

Islam, T., Islam, R., Pitafi, A. H., Xiaobei, L., Rehmani, M., Irfan, M., & Mubarak, M. S. (2021). The impact of corporate social responsibility on customer loyalty: The mediating role of corporate reputation, customer satisfaction, and trust. Sustainable Production and Consumption, 25, 123–135. doi: 10.1016/j.spc.2020.07.019

Jaiyeoba, H. B., Adewale, A. A., & Quadry, M. O. (2018). Are Malaysian Islamic banks’ corporate social responsibilities effective? A stakeholders’ view. International Journal of Bank Marketing, 36(1), 111–125. doi: 10.1108/IJBM-10-2016-0146

Jalilvand, M. R., Nasrolahi Vosta, L., Kazemi Mahyari, H., & Khazaei Pool, J. (2017). Social responsibility influence on customer trust in hotels: mediating effects of reputation and word-of-mouth. Tourism Review, 72(1), 1–14. doi: 10.1108/TR-09-2016-0037

Jan, A., Marimuthu, M., & @ Mat Isa, M. P. bin M. (2019). The nexus of sustainability practices and financial performance: From the perspective of Islamic banking. Journal of Cleaner Production, 228. doi: 10.1016/j.jclepro.2019.04.208

Javed, M., Rashid, M. A., Hussain, G., & Ali, H. Y. (2020). The effects of corporate social responsibility on corporate reputation and firm financial performance: Moderating role of responsible leadership. Corporate Social Responsibility and Environmental Management, 27(3), 1395–1409. doi: 10.1002/csr.1892

Keisidou, E., Sarigiannidis, L., Maditinos, D. I., & Thalassinos, E. I. (2013). Customer satisfaction, loyalty and financial performance. International Journal of Bank Marketing. doi: 10.1108/ijbm-11-2012-0114

KNEKS. (2018). Masterplan Ekonomi Syariah Indonesia 2019-2024. Kementerian Perencanaan Pembangunan Nasional/ Badan Perencanaan Pembangunan Nasional.

Latif, K. F., Pérez, A., & Sahibzada, U. F. (2020). Corporate social responsibility (CSR) and customer loyalty in the hotel industry: A cross-country study. International Journal of Hospitality Management, 89. doi: 10.1016/j.ijhm.2020.102565

Lee, C. Y., Chang, W. C., & Lee, H. C. (2017). An investigation of the effects of corporate social responsibility on corporate reputation and customer loyalty - Evidence from the Taiwan non-life insurance industry. Social Responsibility Journal, 13(2), 355–369. doi: 10.1108/SRJ-01-2016-0006

Liang, C. J., Wang, W. H., & Dawes Farquhar, J. (2009). The influence of customer perceptions on financial performance in financial services. International Journal of Bank Marketing, 27(2), 129–149. doi: 10.1108/02652320910935616

M. Anwar, S., Junaidi, J., Salju, S., Wicaksono, R., & Mispiyanti, M. (2020). Islamic bank contribution to Indonesian economic growth. International Journal of Islamic and Middle Eastern Finance and Management, 13(3), 519–532. doi: 10.1108/IMEFM-02-2018-0071

Mallin, C., Farag, H., & Ow-Yong, K. (2014). Corporate social responsibility and financial performance in Islamic banks. Journal of Economic Behavior and Organization, 103. doi: 10.1016/j.jebo.2014.03.001

Mandhachitara, R., & Poolthong, Y. (2011). A model of customer loyalty and corporate social responsibility. Journal of Services Marketing, 25(2). doi: 10.1108/08876041111119840

Matarneh, B., & Almanaseer, M. (2015). Contribution of Islamic Banks in Financing Small and Medium Enterprises in the Kingdom of Bahrain. International Journal of Financial Research, 6(3), 49–55. doi: 10.5430/ijfr.v6n3p49

Mbama, C. I., & Ezepue, P. O. (2018). Digital banking, customer experience and bank financial performance: UK customers’ perceptions. International Journal of Bank Marketing, 36(2), 230–255. doi: 10.1108/IJBM-11-2016-0181

Mohd Thas Thaker, M. A. Bin, Amin, M. F. Bin, Mohd Thas Thaker, H. Bin, & Allah Pitchay, A. Bin. (2019). What keeps Islamic mobile banking customers loyal? Journal of Islamic Marketing, 10(2), 525–542. doi: 10.1108/JIMA-08-2017-0090

Park, J., Lee, H., & Kim, C. (2014). Corporate social responsibilities, consumer trust and corporate reputation: South Korean consumers’ perspectives. Journal of Business Research, 67(3), 295–302. doi: 10.1016/j.jbusres.2013.05.016

Phillips, S., Thai, V. V., & Halim, Z. (2019). Airline Value Chain Capabilities and CSR Performance: The Connection Between CSR Leadership and CSR Culture with CSR Performance, Customer Satisfaction and Financial Performance. Asian Journal of Shipping and Logistics, 35(1), 30–40. doi: 10.1016/j.ajsl.2019.03.005

Reserve Bank of Malawi. (2021). Financial Stability Report 2021. RBM Annual Report, June, 1–81.

Reverte, C., Gómez-Melero, E., & Cegarra-Navarro, J. G. (2016). The influence of corporate social responsibility practices on organizational performance: Evidence from Eco-Responsible Spanish firms. Journal of Cleaner Production, 112, 2870–2884. doi: 10.1016/j.jclepro.2015.09.128

Saeidi, S. P. S. P., Sofian, S., Saeidi, P., Saeidi, S. P. S. P., & Saaeidi, S. A. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), 341–350. doi: 10.1016/j.jbusres.2014.06.024

Sawmar, A. A., & Mohammed, M. O. (2021). Enhancing zakat compliance through good governance: a conceptual framework. ISRA International Journal of Islamic Finance, 13(1), 136–154. doi: 10.1108/ijif-10-2018-0116

Singh, J., & Sirdeshmukh, D. (2000). Agency and trust mechanisms in consumer satisfaction and loyalty judgments. Journal of the Academy of Marketing Science, 28(1), 150–167. doi: 10.1177/0092070300281014

Suhartanto, D. (2019). Predicting behavioural intention toward Islamic bank: a multi-group analysis approach. Journal of Islamic Marketing, 10(4), 1091–1103. doi: 10.1108/JIMA-02-2018-0041

Suhartanto, D., Gan, C., Sarah, I. S., & Setiawan, S. (2019). Loyalty towards Islamic banking: service quality, emotional or religious driven? Journal of Islamic Marketing, 11(1), 66–80. doi: 10.1108/JIMA-01-2018-0007

Tenenhaus, M., Vinzi, V. E., Chatelin, Y. M., & Lauro, C. (2005). PLS path modeling. Computational Statistics and Data Analysis, 48(1), 159–205. doi: 10.1016/j.csda.2004.03.005

Theodoulidis, B., Diaz, D., Crotto, F., & Rancati, E. (2017). Exploring corporate social responsibility and financial performance through stakeholder theory in the tourism industries. Tourism Management, 62, 173–188. doi: 10.1016/j.tourman.2017.03.018

Ullah, M. H., & Khanam, R. (2018). Whether Shari’ah compliance efficiency is a matter for the financial performance: The case of Islami Bank Bangladesh Limited. Journal of Islamic Accounting and Business Research, 9(2). doi: 10.1108/JIABR-01-2016-0001

Xie, X., Jia, Y., Meng, X., & Li, C. (2017). Corporate social responsibility, customer satisfaction, and financial performance: The moderating effect of the institutional environment in two transition economies. Journal of Cleaner Production, 150, 26–39. doi: 10.1016/j.jclepro.2017.02.192

Zafar, M. B., Sulaiman, A. A., & Nawaz, M. (2022). Does corporate social responsibility yield financial returns in Islamic banking? Social Responsibility Journal. doi: 10.1108/SRJ-04-2020-0160