The purpose of this study is to investigate how perceived ethicality affects the diffusion of new Islamic banking products, focusing on the mediating roles of brand love and brand trust.
A cross-sectional online survey was conducted with 602 Islamic bank customers in Indonesia. Data were analyzed using structural equation modeling with the partial least squares approach.
The results of this study reveal a counterintuitive pattern: ethicality has a positive effect on both brand trust and brand love, but brand trust significantly reduces the diffusion of innovation, while brand love has no significant effect. These findings suggest that emotional and cognitive loyalty, when grounded in moral or religious attachment, may lead to innovation resistance.
While ethicality is often seen as a strength of Islamic banking, this study shows that it may also create unintended barriers to innovation. By highlighting the negative indirect effect of ethicality on innovation diffusion through brand trust, this study provides new theoretical insight into the paradox of ethics and innovation in religious financial systems. This helps explain previously conflicting findings regarding the link between ethical and economic performance in Islamic banks.
