An SEM-based analysis of the determinants of household saving behavior among Islamic bank customers in Indonesia

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Type of the article: Research ArticleAbstractHousehold savings are a fundamental driver of financial stability and economic growth, particularly in developing economies such as Indonesia. Given the presence of a dual banking system that includes both conventional and Islamic banks, understanding the saving behavior of Islamic bank customers is essential for improving financial inclusion and economic resilience. This study aims to empirically investigate the impact of service quality, customer satisfaction, customer value, customer loyalty, and income on household saving behavior in Indonesia’s Islamic banking sector. A structured questionnaire was administered to a sample of 260 Islamic bank customers, and the data were analyzed using Structural Equation Modelling (SEM). The findings reveal that customer loyalty is significantly influenced by service quality (β = 0.23), customer satisfaction (β = 0.41), and customer value (β = 0.15), explaining 31% of the variance in loyalty (R² = 0.31). Additionally, household savings are directly affected by service quality (β = 0.82), customer satisfaction (β = 0.16), customer value (β = 0.06), customer loyalty (β = 0.17), and income (β = 0.08), with the overall model accounting for 55% of the variance in saving behavior (R² = 0.55). These results underscore the critical role of banking service quality and customer-related factors in fostering saving habits within Islamic banks. The study offers actionable insights for policymakers and financial institutions aiming to enhance customer engagement and strengthen savings mobilization strategies in Islamic banking.AcknowledgmentThe authors are thankful to the Deanship of Graduate Studies and Scientific Research at University of Bisha for supporting this work through the Fast-Track Research Support Program.