Roles of Service Quality and Religiosity in Determining Customers’ Retention in Islamic Banks: Empirical Evidence from Southwestern Afghanistan

To retain customers, a high level of service quality is an essential factor in the banking industry. In contrast to the previous government, Afghans are now more driven to follow religion in their daily lives following the Taliban’s 2021 August 15 takeover in the country,while questions about the extent of service quality and religious factors that the Islamic banking sector will provide, as well as how to gain customer retention with the needed quality service provision that customers demand or perceive from banks, remain unanswered. Hence, this article aims to determine how religious variables together with service quality factors affect customer retention of Islamic banks in the southwestern region of the country. The data was collected using a heterogeneous purposive sampling (HPS) strategy for all the Islamic banks in the region. To investigate these relationships, the study used factor analysis, and multiple regression with SPSS version 26.00. The study finds that all Islamic banking service quality and religiosity determinants are positively significant in influencing customer retention in the southwestern zone of Afghanistan. Each SERVQUAL dimension had varying degrees of influence on customer retention, with empathy, reliability, responsiveness, assurance, and tangibility having the most significant influence. Religious motivation was the most influential element of customer retention concerning religious determinants. This indicates the importance of emphasizing religious motivation and employee-customer connection by Islamic banks. In addition, the findings revealed that a high level of service quality plays a significant role in customer retention in the Islamic banking system.This study combines a cross-sectional analysis with a case study of a particular national zone. As a result, the outcomes might not be generalizable to the entire nation. It would be good to perform these studies because they are conducted similarly in other nations (such as the ASEAN countries). Future research may look into other antecedents of customer retention that were ignored in this study (such as trust and commitment). The findings of the study therefore may assist policymakers in improving the current banking industry by focusing on the Islamic banking system, which would be able to restore service quality and religious motivation among customers as they believe in the Islamic banking system, which will contribute positively to economic growth.