The Journal of Asian Finance, Economics and Business

Korea Distribution Science Association (한국유통과학회)
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The Role of Customer Trust and Reputation on Customer Loyalty: An Empirical Study of Micro Finance Institutions in Indonesia

  • ANIS, Marjukah (Faculty of Administrative Science, University of Merdeka Malang) ;
  • WIDJI, Astuti (Faculty of Administrative Science, University of Merdeka Malang) ;
  • FAJAR, Supanto (Department of Business Management, Faculty of Business and Economics, University of Merdeka Malang)
  • Received : 2022.06.30
  • Accepted : 2022.09.30
  • Published : 2022.10.30
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Abstract

This study investigates the effect of serv-qual and reputation on customer loyalty through the trust of deposit customers in Micro Finance Institutions. The population was deposit customers at BMT distributed into 5 provinces of the Special Region of Yogyakarta, and a survey was conducted from January 2021 to February 2022. The probability random sampling technique was used to select the final sample, and a total of 221 responses were collected using a questionnaire. Technical data analysis was done using the Structural Equation Modeling (SEM), supported by AMOS 22.0 program. The results showed that serv-qual and reputation have a positive and significant impact on the trust and loyalty of deposit customers at BMT. Customers positively and significantly impact the relationship between serv-qual and reputation on customer loyalty. The biggest contribution to loyalty was generated by the variable customer trust (0.399), followed by service quality (0.359) and reputation (0.166). Micro Finance Institution needs to improve the management of deposit customers by improving serv-qual, reputation, and customer trust and conduct comparative research between conventional financial institutions and other informal financial service institutions.

Keywords

1. Introduction

Baitul Mall wa Tamwil (BMT, is a microfinance institution that is growing and developing quite rapidly in Indonesia. Institutionally, BMT is a sharia financial services cooperative legal entity, based on Indonesia Law no. 10/1999 (Amendment to the Law of the Indonesia No. 7/1992: concerning Banking) (Ismail et al., 2014). BMT is an integrated independent business center, carrying the concept of Baitul Maal, which acts as a socio-religious institution (a receipt of infaq, zakat, waqab, alms, etc.), as well as Baitul Tamwil, which carries out its role as a financial institution, which prioritizes the nature of business, by productive business development targets, encouraging small communities to invest, with the aim of improving the quality and business of small communities, through investment (Djazuli, 2002); using sharia principles, in the form of savings and deposits (mudharobah muqoyyadah) (Quraisy et al., 2019); using the profit-sharing system in BMT (Sharia Law No. 21/2008), while conventional banking applies the interest system. BMT, as a financial service institution, in its operations has competition with formal financial service institutions such as banking and competition among BMTs in terms of deposit services, which needs to have a strategy to win the competition that is getting bigger and tighter (Ali et al., 2014). BMT needs to focus on customer management, including serv-qual management, and building and maintaining a reputation to build the trust of deposit customers which in turn will increase the loyalty of deposit customers to BMT.

The level of service must be improved (Harimurti & Suryani, 2019) since it is the primary determinant of success in the marketplace (Chu et al., 2012) a competitive weapon in the financial services industry/institution, and a key factor in the company’s performance (Aydin & Özer, 2005). Reputation is a fundamental driver of success (Schwaiger, 2004); its a collective representation of past and result with the present which is a picture of the stakeholders’ valuable gains (De Castro et al., 2006), strengthens the relationship between companies/institutions and customers (Gorondutse, 2014), provide a comparative advantage and is sustainable, and which will ultimately increase customer confidence and purchase decisions (Lafferty & Goldsmith, 1999). Trust is a form of customers’ willingness to rely on exchange partners (Delgado-Ballester & Luis Munuera-Alemán, 2001) because a strong and reliable company/institution will build customer trust and improve the company’s bargaining position (Yasin & Bozbay, 2011), be a determining factor for sustainable relationships (Chou, 2014); where trust is an important antecedent for customer loyalty (Aydin & Özer, 2005). The management of customer loyalty in the financial services industry/banks/institutions, becomes very important (Ali et al., 2014; Gul, 2014) because loyal customers will make repeat purchases (Griffin & Ebert, 2006); which allows companies/institutions to save costs and increase profits (Hadi & Indradewa, 2019). Loyalty can act as feedback on other variables, such as trust and reputation, which are built on the existence of good serv-qual (Menges & Yuanqiong, 2019).

Service quality is often defined as an integrated evaluation that reflects customer perceptions regarding service-specific dimensions which include reliability, responsiveness, assurance, empathy, and physical service (Zeithaml et al., 2009); is the result of a comparison between expectations and perceived performance on the perception of the way services are provided (Caruana, 2002). Regarding customer loyalty, trust plays an important role in shaping customers’ views on the level of serv-qual (Menges & Yuanqiong, 2019) because, with a high quality of service, customer trust in service providers will be deeper (Yieh et al., 2007). Furthermore (Harimurti & Suryani, 2019) mentioned the application of the Total Quality Management (TQM) dimension to service quality had a significant and positive effect on the state-owned bank industry in East Java. In the bank industry, customer loyalty is significantly influenced by variables in service quality.

To win global competition, there are many ways to maintain a competitive advantage (Makanyeza & Chikazhe, 2017), including by providing high serv-qual (Han et al., 2011; Hu et al., 2009; Hussain et al., 2015) and winning the competition (Dahiyat et al., 2011). This is because service quality is the key to the company’s success (Kuo et al., 2009), especially in service-based companies (Thaichon et al., 2014), which will ultimately improve the company’s performance (Hu et al., 2009). In business competition, it is not only how to get customers, but also how to get status, especially in similar companies (Yasin & Bozbay, 2011). Reputation is defined as a widely circulated, non-repeatable impression of the organization/company as a form of organizational disclosure (Carroll, 2015) because it provides a fundamental influence, both commercial and non-commercial (Davies et al., 2005). Companies that already have a reputation will behave well and avoid negative behavior, as well as strengthen customer confidence in the integrity and reliability of the company (Keh & Xie, 2009); is a valuable asset and is a long-term reward for financial stability, which describes the quality of management (Marken, 2002). Company reputation is an intangible asset (Hadi & Indradewa, 2019); that cannot be imitated by competitors (Karimi et al., 2017).

Many experts define trust as the confidence of the parties in other parties in terms of meeting customer needs and desires, as well as the availability of services to meet customer needs, in the form of exchanging goods and services (Gul, 2014); as a form of customer confidence in service providers to meet customer needs and show expectations (Lukas & Schöndube, 2012); built based on perceived credibility and benevolence (McKnight et al., 2002); based on integrity (Kotler, 2012). Trust acts as a mediating variable of customer behavior before and after purchase (Gul, 2014) and as a key institutional factor in the financial sector (Nguyen et al., 2013). In service businesses and organizations, especially financial service businesses like BMT, where customer loyalty management is required, establishing and retaining customer loyalty is crucial (Bruneau et al., 2018). Making consistent and repeated purchases, not purchasing competing goods, and being willing to recommend positively to the parties are all examples of acts of loyalty. Other behaviors of loyalty include resistance to persuasion and the capacity to pay a higher price (Griffin & Ebert, 2006; Jiang et al., 2016; Agustin & Singh, 2005). Customers’ readiness to use the products given by the institution or company, their willingness to inform and urge others to use the Product offered by the firm and their willingness to spread the good word about the institution or company are all examples of loyalty measuring indicators (Foster & Cadogan, 2000). Repeat business, reluctance to hear bad things about the business and recommendations for the business are all ways to gauge customer loyalty (Kotler & Keller, 2012).

A research design is made as a quantitative research, which measures the strength of the relationship between two or more variables, including data collection to test research hypotheses based on the responses of research subjects on the status the latest, to address the research problems formulated in advance and based on the problems statement (Arikunto, 2010). The type of research that has been developed is explanation research.

The research sample is BMT deposit customers under the Mitra Nugraha Sharia Cooperative Center (Puskopsyah) spread over 5 (five) districts in the province of the Special Region of Yogyakarta, including Yogyakarta Municipality, Bantul Regency, Gunung Kidul Regency, Kulon Progo Regency and Sleman Regency and is a deposit customer for more than 2 (two) years. The number of research samples is determined based on the opinion of Hair et al. (2014) in Gunarto (2018), which state that if the number of samples is more than 400 it will be very sensitive, and it will be difficult to get a suitable model in the estimation of interpretation with the Structural Equation Model (SEM). The method used to select the respondents is a simple and direct random sampling technique; specifically, the population is deposit customers at BMT who are more than 2 (two) years old as time deposit customers at BMT. The sample was chosen at random to measure the indicators of customer loyalty in deposits. This guarantees that they are compliant and possess qualities that are pertinent to the research goal.

2. Literature Review and Hypotheses

This study is an extension of Chou’s (2014) investigation into the relationship between trust and loyalty and the effects of service quality, finding that trust significantly and positively affects loyalty (Chou, 2014). The findings support previous research (Ali et al., 2014; Caruana, 2002; Dahiyat et al., 2011; Harimurti & Suryani, 2019; Karyose et al., 2017; Makanyeza & Chikazhe, 2017; Menges & Yuanqiong, 2019). Reputation management is a fundamental and important concern to ensure customer loyalty (Davies et al., 2005); to succeed in business competition, especially with similar businesses (Yasin & Bozbay, 2011) because to maintain reputation, companies will stop engaging in unethical behavior (Keh & Xie, 2009). Several previous studies have formulated that reputation has a significant and positive effect on bank customer loyalty in Pakistan (Ali et al., 2014); on sharia insurance services in Malaysia (Abdur Rehman et al., 2020).

Serv-impact qual had a significant and positive impact on trust (Chou, 2014; Chu et al., 2012; Dahiyat et al., 2011; Purwoko, 2015). Companies must be able to compete to build a reputation, acquire, and maintain customers (Nguyen et al., 2013; Sadeghi et al., 2018). Previous findings/ studies too showed that trust has a significant and positive effect on loyalty (Chou, 2014), as well as findings for bank customers in Pakistan (Ali et al., 2014), Indonesia (Sitorus & Yustisia), and Surabaya, Indonesia’s sharia bank customers (Fauzi & Suryani, 2019). It can be concluded that there is a direct relationship between customer trust and customer loyalty, and the magnitude of the effect is 81% (Nguyen et al., 2013) and 65% (Menges & Yuanqiong, 2019), respectively.

Additionally, it demonstrates the customer trust variable’s ability to act as a mediating variable in the relationship between service quality and loyalty (Rali et al., 2014; Dahiyat et al., 2011; Hadi & Indradewa, 2019; Karyose et al., 2017). Given the foregoing, the following hypotheses are tested in this study:

H1: Serv-qual and reputation have a significant and positive effect on customer loyalty for deposits at BMT in the Province of the Special Region of Yogyakarta.

H2: Serv-qual and reputation have a significant and positive effect on deposit customers’ trust at BMT in the Province of the Special Region of Yogyakarta.

H3: Customer trust has a significant and positive effect on customer loyalty on deposits at BMT in the Province of the Special Region of Yogyakarta.

H4: Serv-qual and reputation have a significant and positive effect on customer loyalty through deposit customer trust at BMT in the Province of the Special Region of Yogyakarta.

3. Research Methodology

3.1. Research design

This research is designed as quantitative descriptive research with descriptive explanation research. The variables in this study include serv-qual and reputation as exogenous variables; customer trust as an intervening variable, and customer loyalty as endogenous variables. So that in the study, with latent variables including service quality variables of as many as 19 indicators, reputation variables of as many as 8 indicators, and customer loyalty variables of as many as 10 indicators, the total number of indicators for this latent variable was 37 indicators.

3.2. Data Collection and Analysis Techniques

The population in this study are BMT deposit customers under the Sharia Cooperative Center (Puskopsyah) of the Special Region of Yogyakarta (DIY), Indonesia. Due to restrictions on obtaining the population of deposit customers (the Bank Secrecy Law, specifically RI Law No. 10/1999 regarding amendments to Law No. 7/1992 concerning Banking, as well as Sharia Law No. 21/2008), the accuracy of the number of research samples refers to the opinion that the sample guideline used in the structural equation model is 5–10 times the number of parameters estimated so that with a total of 49 indicators, the sample size is in the range of 22–50. Researchers limited the number of samples in this study to 221 because more than 400 samples would make the study highly sensitive and make it impossible to find a model that works well for the estimation of interpretation with the Structural Equation Model (SEM) (Gunarto, 2018; Hair Jr. et al., 2014). The sampling technique is probability random sampling, using a structured questionnaire. The technical data analysis uses SEM, supported by the AMOS program.

4. Results and Discussion

4.1. Respondent Profile

The unit of analysis in this study is customer deposits at Baitul Maal wat Tamwil (BMT) in the Province of the Special Region of Yogyakarta, Indonesia. The research analysis data was obtained from the questionnaire instrument which was distributed to as many as 250 questionnaires; return = 239 (rate of return = 95.6%); 22 questionnaires (4.4%) were declared void due to incompleteness in data entry. The questionnaires were eligible to be used for further analysis as many as 221 (92.5%). The results of the analysis of the respondent’s profile as a whole obtained that the highest distribution was respondents with the age of more than 50 years = 73 respondents (33%); female = 127 respondents (57.5%); The latest education level is Bachelor = 108 respondents (48.9%), as private employees = 105 respondents (47.5%); with the origin of domicile from Bantul Regency = 54 respondents (24.4%); have been deposit customers at BMT for more than 5 years = 141 respondents (63.8%), and have been deposit customers at BMT for more than 5 years as many as 74 respondents (33.5%).

4.2. Descriptive Analysis

The distribution of respondents’ answers can be summarized in Table 1 as follows:

Table 1: The Distribution of Respondents’ Answers

OTGHEU_2022_v9n9_205_t0001.png 이미지

The service quality variable has an overall average score of 4.60, which may be very accurately interpreted as meaning that respondents generally concur that the serv-qual variable is based on indicators of reliability, physical service, responsiveness, empathy, and security assurance. The contributions from the five indicators are essentially equal. Response time and dependability made the biggest contributions (mean score 4.61). Physical service, empathy, and security assurance indicators made a slightly smaller contribution (mean score 4.60). It may be said that the five serv-qual indicators offer a very balanced contribution, with one very minor exception.

Overall, the average score for the reputation variable is 4.57, in the very good category. The biggest contribution is shown by the BMT identity indicator (4.58); followed by the BMT image indicator (4.57). On the customer trust variable, the overall average value is 4.53; classified as very good. The biggest contribution is shown by the ability indicator (4.58); followed by the good intentions indicator (4.57). Integrity gave the smallest contribution (4.51). The average score of respondents’ answers for the customer loyalty variable is 4.40. Regular use of the service made the biggest contribution (4.42); followed by indicators of using other BMT services and indicators recommending to other parties, each with an average score of 4.39.

4.3. Structural Model Analysis

The results of the Confirmatory Factor Analysis (CFA) and Full Model analysis are presented in Figures 1 and 2 as follows:

According to Figure 1, the relationship between the loading factor value on each indicator creating the latent variable and the parameter values of the relationship are all valid.

OTGHEU_2022_v9n9_205_f0001.png 이미지

Figure 1: Confirmatory Factor Analysis Estimation Results

Based on Figure 2, it can be concluded that all of the indicators employed in this study are valid because they all have loading factor values that are greater than 0.5. Additionally, the construct reliability of every variable has been demonstrated to be greater than 0.7, indicating the validity of the questionnaire utilized in this study.

OTGHEU_2022_v9n9_205_f0002.png 이미지

Figure 2: Structural Equation Model

4.4. Hypothesis Testing Results

Based on Table 2, the results of hypothesis testing can be explained: 1). Serv-qual and company reputation have a significant and positive impact on customer loyalty and deposits at BMT. Service reputation (2.28) and quality (4.712) have the greatest impact on customer loyalty (c.r 1.96). 2). The serv-qual and reputation variables have a significant and positive impact on deposit consumers’ trust. Customer loyalty is significantly impacted by service quality (13.009) and reputation (4.072). (c.r 1.96). 3). The trust variable has a 4.858 percent positive and significant impact on deposit customers’ loyalty at BMT in DIY Province (c.r. 1.96).

Table 2: Hypothesis Testing Results

OTGHEU_2022_v9n9_205_t0002.png 이미지

The direct and indirect effects, as well as the total effects, are presented in Table 3 as follows:

Based on Table 3 and Figure 3 it can be explained that the direct effect of serv-qual on customer loyalty (0.359) is greater than the indirect effect of serv-qual on customer loyalty (0.252), so it can be interpreted that the customer trust variable acts as a mediating variable on the relationship between the serv-qual and customer loyalty. The direct influence of reputation on customer loyalty (0.166) is greater than the indirect effect of reputation on customer loyalty (0.095), so it can be interpreted that the customer trust variable act as a mediating variable in the relationship between reputation and customer loyalty. This means that hypothesis 4 is accepted.

Table 3: Direct and Indirect Effects of Independent Variables

OTGHEU_2022_v9n9_205_t0003.png 이미지

OTGHEU_2022_v9n9_205_f0003.png 이미지

Figure 3: Direct and Indirect Effects

4.5. Discussion

Description of serv-qual, reputation, customer trust, and customer loyalty on deposits at BMT.

In essence, Serv-qual is a comprehensive evaluation of customer perceptions of service-specific aspects, including dependability, responsiveness, assurance, empathy, and physical service (Zeithaml et al., 2009). The findings demonstrated that the indicators of dependability and empathy contributed the most (loading factor = 0.994). The ability to make deposits at the customer’s location and the possibility of negotiating a profit-sharing plan are the final two indicators of reliability, together with the possibility that service delivery does not favor one customer over another.

In the responsiveness indicator, questions about the ease of doing deposit transactions gave the highest contribution; followed by questions regarding speed in handling deposit customer complaints; then the question regarding whether skilled staff is needed in providing deposit services; and finally the question of speed in providing services to deposit customers. The results of the study indicate that instead of speed in service delivery, the priority is given to the accuracy in recording what deposit customers expect. This is related to the amount of investment value invested by customers within a certain period of time in the deposit service program. In the serv-qual variable, the results show that the guarantee indicator provides the largest contribution (loading factor = 0.988), followed by the responsiveness indicator (0.964) and the physical service indicator giving the smallest contribution (0.962).

Reputation is an impression that is widely circulated, owned by the company, cannot be repeated, and is a form of organizational/company disclosure (Carroll, 2015). According to the findings of this study, the BMT identity indicator contributed most to the reputation variable (loading factor = 1.022). The statement that BMT must have differentiating characteristics makes up the largest portion of the BMT identity indicator, followed by the statements that BMT must have a name that is simple for customers to remember, that BMT must have an appealing logo, and finally must make customers feel proud in being a deposit customer at BMT.

The contribution of the reputation variable to customer loyalty on the BMT image indicator gives a loading factor value of 0.963. Several instruments that support success are: A statement about the need for BMT staff to create a positive first impression for time deposit customers is followed by a statement about the need for BMT to uphold the principle of honesty in the profit-sharing system in the deposit service program. This is followed by a statement about the assurance that BMT won’t deceive its customers. The requirement for BMT to have a competent management system makes up the smallest portion of the question instrument.

Customer trust in this study is reflected in three indicators, ability, goodwill, and integrity. The results showed that the three indicators of customer trust contributed equally in terms of customer loyalty, with a loading factor of 0.997. The descriptive analysis shows the ability indicator has the largest average value, which implies the belief that BMT can be trusted, and hence, BMT will secure deposits belonging to its customers.

Customer loyalty in this study is reflected by three research indicators, including regular use of services, willingness to use other BMT services, and willingness to recommend to other parties. The results showed that the indicator of willingness to provide recommendations to other parties gave the greatest contribution (loading factor = 1.002). The highest contribution in the sequence is supported by the statements: 1) that the respondent will spread the goodness of BMT to others, and 2). will spread the goodness of deposit product information to families, 3). His willingness to invite other people to use the deposit service provides the smallest contribution.

The influence of serv-qual and reputation on customer loyalty deposits at BMT in the Province of the Special Region of Yogyakarta.

The results showed that the serv-qual variable had a positive and significant effect on customer loyalty (c.r. = 4,712 (>1.96); p = 0.000 (<0.001); the results meet the criteria for the influence of variable relationship). It is also reflected in the average value of the distribution of the most dominant respondents’ answers with an average value of 4.60 (very good criteria), in line with the results of the study that serv-qual is a comparison between expectations and the perceived performance of a service, and is an expectation of service in the form of perception of the way services are provided (Caruana, 2002). The study’s findings show that the quality variable makes the biggest contribution to customer loyalty. According to some theories, service quality drives business profits (Kassim & Abdulla, 2006). In addition, the Basel II convention, state ownership, net interest margin, and bank size all have a significant impact on bank profitability (Khang et al., 2022). These findings confirm prior research that serv-qual builds customer loyalty (Chou, 2014), is a strategy to draw in new customers (Kishada & Wahab, 2015), a sustainable asset that must be maintained and cannot be neglected (Gul, 2014), and consideration in the formulation of loyalty development strategies (Ali et al., 2014).

Reputation is a valuable asset that includes the quality of products and services, the company’s ability to innovate, a long-term reward for financial stability, quality of management (Marken, 2002), and a set of beliefs held on the ability and willingness of the company to satisfy the company’s stakeholders, is considered as a differentiator of the company (Walsh & Beatty, 2007); and reflects the company’s reaction to goods, services, company interactions with customers, internal stakeholders, including management, and employees.

According to the study’s findings, reputation has a significant and positive impact on customer loyalty, as evidenced by the variable’s value of cr 2.280, meeting the requirements (p = 1.96) and at the value of p = 0.023 (p = 0.05), and having a value of cr 2.280. Additionally, the distribution of respondents’ responses, which averaged 4.58, reflects it is very good. The findings of this study are in line with those of earlier studies showing that reputation influences customer loyalty positively (Ali et al., 2014), that a better reputation will increase customer loyalty (Hadi & Indradewa, 2019), that the image dimension influences customer loyalty (Karyose et al., 2017), that increasing reputation has an effect on increasing customer loyalty (Gul, 2014), and that reputation influences customer commitment, which will ultimately increase loyalty (Makanyeza & Chikazhe, 2017); high reputation encourages purchasing tendencies (Sadeghi et al., 2018) every reputable company has the ability to respond quickly to unexpected changes in the business environment (Gorondutse, 2014); reputation is positively correlated with loyalty (Ali et al., 2012); provide a positive correlation between reputation and customer loyalty (Abdur Rehman et al., 2020), a good reputation increases the bargaining position of business competition and increases loyalty (Schwaiger, 2004) because reputation is an intangible asset, such as trademarks, patent rights, copyrights etc. (Hadi & Indradewa, 2019).

Reputation is important for companies because it provides an opportunity to reduce transaction costs and affect company profits (Caruana, 2002; Roberts & Dowling, 2002; Rose & Thomsen, 2004; Walsh & Beatty, 2007); increase competitive advantage and provide financial benefits to the company (Luo & Bhattacharya, 2009). In general, the excellent service of service companies such as banking needs to be accompanied by a good bank reputation in the eyes of customers (Karyose et al., 2017). This is because customers will ultimately rate the bank based on its reputation, which will have an impact on customer loyalty (Bontis et al., 2007; O’Loughlin & Coenders, 2004; Uttami et al., 2014; Yaqoob & Aslam, 2012).

Based on the cr value of serv-qual on customer loyalty, 4.712, and P-value of 0.000, the first hypothesis, which claims that service quality and reputation have a significant and positive effect on customer loyalty, is accepted. The results also show that the cr value of reputation on customer loyalty is 2.280 and the P-value it has is 0.023.

The influence of serv-qual and reputation on customer trust BMT deposits in the Province of th serv-qual e Special Region of Yogyakarta.

Trust from customers is significantly and positively influenced by service quality and reputation, based on the cr value of serv-qual on customer trust (13.009) and the P-value (0.000). The findings revealed that the P-value was 0.000 and that the cr value of reputation on customer trust was 4.072. The findings revealed that respondents’ answers were distributed, with a mean value of 3.58. (very good). Research on cellular service users in Jordan (Dahiyat et al., 2011), package delivery services in Taiwan (Purwoko, 2015), and users of forklift rental services in East Java (Purwoko, 2015) all reveal consistent results (Chou, 2014).

The findings are consistent with several studies, including those on Turkish mobile phone users undertaken by Yasin and Bozbay (2011), and other customer-related studies such as Gul (2014), Nguyen et al. (2013), and Sadeghi et al. (2018). Companies need to be competitive in building customer reputation and trust if they want to attract and retain customers. Since reputation has an impact on customer satisfaction and trust levels, BMT must win the race to become a reputed institution (Yasin & Bozbay, 2011). Additionally, ethical leadership is essential in developing the workplace’s unique ethical environment and reducing employee turnover intention (Affnaan et al., 2022). Six more characteristics, including dependability, responsiveness, service skills, empathy, tangible means, and service price, are also linked to customer satisfaction (Nguyen et al., 2022). Therefore, to build client trust, service organizations need to put more emphasis on serv-qual (Chu et al., 2012).

The effect of customer trust on customer loyalty on deposits at BMT in the Special Region of Yogyakarta.

In terms of service fulfilment, trust is the customer’s belief in the service provider to meet customer needs and showing hope. Trust is built based on perceived credibility, benevolence (McKnight et al., 2002), and honesty (Kotler & Keller, 2012). Regarding marketing relationships, trust acts as a mediating variable of customer behavior before and after purchase (Gul, 2014), as a predictor in the online purchasing system (Lee & Lin, 2005; Sadeghi et al., 2018), and as the main determinant of the relationship between customers and companies (Sirdeshmukh et al., 2002). According to McKnight et al. (2002) and Sirdeshmukh et al. (2002), trust can help businesses build and maintain customer loyalty and encourage customers to believe in the promises made in a company’s advertising material. Based on the cr = 4.859 and P-value = 0.001 (***), hypothesis 3 holds that customer trust has a significant and positive effect on customer loyalty. The findings of this study are in line with many previous studies, including those on Pakistani bank customers (Ali et al., 2012), Indonesian bank customers (Fauzi & Suryani, 2019; Sitorus & Yustisia, 2018), and Union credit card holders in Brunswick Province, Canada (Nguyen et al., 2013). Hence, the relationship between consumer loyalty and trust is clear.

The influence of serv-qual and reputation on customer loyalty through customer trust deposits at BMT in the Province of the Special Region of Yogyakarta

It is important to build and maintain customer loyalty in service businesses/organizations, particularly in financial services like BMT. Customer loyalty management is crucial in the banking industry because of the fierce and intense competition (Bruneau et al., 2018; Leask, 2008). The findings support hypothesis #4, which holds that service quality and reputation significantly and positively influence customer loyalty through the trust of BMT customers. This is because the direct impact of service quality on customer loyalty is greater (0.359) than the indirect impact of service quality on customer loyalty (0.252). The impact of serv-qual on customer loyalty is mediated by the customer trust variable. The finding that trust is a mediating factor in the relationship between service quality and customer loyalty is in line with previous research (Dahiyat et al., 2011).

Additionally, the findings indicate that when calculating the combined effect of the serv-qual and reputation variables on customer trust, serv-qual has a more significant overall influence (0.632) than the reputation variable (0.237).

The overall effect of serv-qual variables, reputation, and customer trust on customer loyalty was calculated, and the results show that serv-qual has the greatest total influence (0.611), followed by reputation (0.399), and then customer trust (0.261).

5. Conclusion

As we previously stated, the goal of this study is to examine how customer loyalty is influenced by service reputation and quality through customer trust in BMT. The findings, therefore, demonstrate that the variables relating to service quality and reputation have a positive and significant impact on customer loyalty and trust in BMT. Furthermore, customer trust has a positive and significant effect on customer loyalty. In addition, the customer trust variable has the most dominant influence on customer loyalty compared to service quality and reputation variables. The important role of service quality and reputation variables on customer loyalty obtained consistent conclusions, thus strengthening the previous anchovy. So that it can be interpreted that there will be an increase in customer loyalty if there is an increase in service quality and reputation.

The important role of service quality and reputation variables on customer trust in BMT obtained a consistent conclusion, which means that there will be an increase in customer trust in BMT if there is an increase in service quality and reputation variables. In the end, it was determined that there would be an increase in customer loyalty, despite there being no improvement in service quality and reputation due to the significant role of the customer trust variable as an intervening variable.

Based on the findings of this study, it is suggested that further research be conducted on other variables related to customer management, such as customer satisfaction, customer engagement, or other variables. In the meanwhile, the study’s focus would need to be on comparisons between traditional financial service institutions like banks and other microfinance organizations like rural banks, etc. (both sharia and non-sharia). Practical implications that can be utilized by stakeholders of BMT and other financial services that manage deposit services include: BMT stakeholders need to manage customers with a focus on serv-qual management, seek to build, maintain and strengthen the reputation so that they can deposit customers have trust in BMT, which will ultimately increase customer loyalty.

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