An examination of factors influencing customer trust in Islamic finance
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Background of the Study
Customer trust is a fundamental pillar in the financial services sector, and its importance is magnified in Islamic finance where ethical values and religious adherence are central. Over the past few years, heightened competition and evolving market dynamics have pushed Islamic financial institutions to innovate in building and maintaining customer trust. Trust in this context is not solely about reliability but also involves the perception of adherence to Shariah principles, transparency in operations, and the ethical conduct of the institution (Rauf, 2023). The interplay between these dimensions forms the basis of customer loyalty and long term business sustainability.
Recent empirical studies have indicated that factors such as service quality, corporate governance, and adherence to religious values significantly influence customer trust (Bashir, 2024). Moreover, technological advancements in digital banking have introduced new touchpoints for customer engagement, thereby reshaping traditional trust dynamics. While digital channels offer convenience, they also raise concerns about data security and authenticity of service—issues that are particularly sensitive in the context of Islamic finance where ethical considerations are paramount (Siddiqui, 2023). Consequently, understanding the factors that build or erode customer trust has become an essential research area for Islamic financial institutions striving to secure competitive advantage in a rapidly changing market environment.
Cultural, social, and economic dimensions also play critical roles in shaping trust. For example, the cultural affinity for ethical banking practices in many Muslim-majority countries reinforces the importance of trust, while economic uncertainties can either strengthen reliance on trusted institutions or heighten skepticism (Kamran, 2024). Additionally, corporate scandals and regulatory lapses in conventional finance have prompted a shift towards Islamic finance as a more ethical alternative, further elevating customer expectations regarding transparency and accountability.
This study investigates the multidimensional factors influencing customer trust in Islamic finance, examining both internal drivers such as service quality and external influences like market reputation and regulatory standards. By integrating quantitative surveys and qualitative case studies, the research aims to provide a comprehensive framework that explains how trust is built, maintained, and sometimes undermined in the Islamic finance context (Hafeez, 2025). Such insights are critical for Islamic banks seeking to enhance customer relationships and foster long term loyalty in an increasingly competitive market.
Statement of the Problem
Despite the recognized importance of customer trust, Islamic financial institutions face persistent challenges in nurturing and sustaining it. One major problem is the gap between customer expectations and the actual service delivery by Islamic banks. While these institutions are founded on ethical principles, inconsistencies in transparency, communication, and service quality have occasionally led to customer dissatisfaction (Javed, 2023). In addition, the rapid digital transformation of financial services has introduced new trust issues, including concerns over cybersecurity and data privacy, which can undermine the perceived reliability of these institutions (Aslam, 2024).
Moreover, divergent interpretations of Shariah compliance can lead to conflicting messages about what constitutes ethical banking practices. This inconsistency not only confuses customers but also erodes their confidence in the bank’s commitment to religious and ethical standards (Qadir, 2023). In some instances, inadequate disclosure of financial information and the perceived opacity in decision making processes have further compounded the issue, resulting in diminished customer trust.
Furthermore, market competition is intensifying as conventional banks adopt ethical banking practices to attract similar customer segments. This competitive pressure forces Islamic banks to continuously improve their service quality and transparency. However, the lack of a standardized framework for measuring customer trust in Islamic finance has impeded efforts to systematically address these challenges (Mirza, 2024). The problem is compounded by the fact that many Islamic financial institutions have limited empirical data on the drivers of trust, making it difficult to implement targeted strategies for improvement. Thus, there is an urgent need to explore the factors influencing customer trust and to identify actionable measures that can help bridge the gap between customer expectations and service delivery.
Objectives of the Study
• To identify the key factors that influence customer trust in Islamic finance.
• To evaluate the impact of service quality, transparency, and Shariah adherence on customer trust.
• To propose a strategic framework for enhancing trust and customer loyalty in Islamic financial institutions.
Research Questions
• What are the primary factors that shape customer trust in Islamic finance?
• How do service quality and transparency contribute to building trust?
• What role does Shariah compliance play in influencing customer perceptions?
Research Hypotheses
• H1: High service quality significantly increases customer trust in Islamic finance.
• H2: Transparent communication and disclosure positively affect customer trust levels.
• H3: Strong adherence to Shariah principles enhances customer loyalty in Islamic banking.
Scope and Limitations of the Study
This study focuses on customers of Islamic banks in selected regions, drawing on data collected between 2023 and 2025. Limitations include potential sample bias and the difficulty in quantifying subjective trust factors across diverse cultural settings.
Definitions of Terms
• Customer Trust: The belief in an institution’s reliability, ethical standards, and adherence to promised values.
• Shariah Compliance: The extent to which financial practices adhere to Islamic legal and ethical principles.
• Service Quality: The measure of how well the delivered service meets customer expectations.
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