Antecedents of SMEs’ satisfaction and loyalty towards Islamic microfinance: Evidence from Central Java, Indonesia

Abstract

Purpose

The purpose of this paper is to examine factors influencing the level of satisfaction of Islamic microfinance customers and their loyalty toward their patronized institution in Central Java, Indonesia.

Design/methodology/approach

The target population is all customers of Islamic microfinance institutions in Central Java, Indonesia. A sample of 300 respondents is selected for this study using purposive sampling and only 246 data are used in the analysis. The data are then analyzed using structural equation model with cost of loan, risk of loan, loan repayment, family welfare and Shariah issues as exogenous variables and satisfaction and loyalty as endogenous variables tested in the model.

Findings

The findings have shown that there is a significant effect of cost of loan, risk of loan and loan repayment upon the customers’ satisfaction and from the customers’ satisfaction toward the customers’ loyalty. The Shariah issues and family welfare were statistically insignificant to predict the customers’ satisfaction, which imply a big homework of Islamic finance academics and practitioners in Indonesia to educate people about Islamic finance and to show the real positive impact of Islamic finance models toward poverty.

Originality/value

Central Java is the province with a large number of SME and microfinance institutions, both conventional and Islamic, in Indonesia. This study provides a good insight for researchers seeking updated information about microfinance in Indonesia.

Citation

Rokhman, W. and Abduh, M. (2020), "Antecedents of SMEs’ satisfaction and loyalty towards Islamic microfinance: Evidence from Central Java, Indonesia", Journal of Islamic Marketing, Vol. 11 No. 6, pp. 1327-1338. https://doi.org/10.1108/JIMA-05-2018-0090