Purpose This study aims to explore the key factors influencing customer loyalty in Islamic banking within the Iraqi market, as well as the consequences of loyalty. Despite the increasing global significance of Islamic finance, there is a notable lack of empirical research addressing how both causal and contextual factors shape customer loyalty in Iraq. This research seeks to fill this gap by examining the dynamics of customer loyalty and its perceived value to customers, thereby contributing to a deeper understanding of customer relationships in Islamic banking. Design/methodology/approach The research is conducted using a grounded theory approach, allowing for an exploration of the objective through in-depth qualitative analysis. In-depth interviews are conducted with various stakeholders, including customers, managers and bank employees. The inclusion of heterogeneous groups offers a richer and deeper understanding, increasing the validity and transferability of the findings. Findings A model of customer loyalty in Islamic banking in Iraq is developed, highlighting social, individual and banking characteristics as indicators of causal factors. Macroeconomic trends, government policy and media and advertising are identified as contextual factors, while competitor actions, life events and demographic profiles are recognized as intervening factors. The findings also suggest that loyalty brings positive values not only to the customers, such as positive experiences, lifetime value and better financial stability, but also to the banking institutions, including word-of-mouth referrals, competitive advantage and increased customer advocacy. Research limitations/implications This study contributes to the advanced development of a theoretical framework on customer loyalty. In addition, the findings offer valuable insights into the relationship between Sharia compliance and customer loyalty, calling for banking institutions to prioritize adherence to Sharia principles. Originality/value This study explores areas of research within the context of Iraqi Islamic banking, allowing for the discovery of new and original insights into causal, contextual and intervening conditions of customer loyalty, which signify the Iraqi social phenomena. While the scope focuses on customers, the grounded theory approach opens up to emergent patterns and relationships.
