By Ayomide Otitoju
The Islamic Development Bank Institute (IsDBI) and IE University Spain, through the IE Foundation, have launched a joint initiative to develop contract models grounded in European legal frameworks and aligned with Islamic finance principles, aimed at facilitating investment in startups.
The initiative seeks to design financing instruments tailored to the needs of early-stage ventures operating within civil law systems. While tools commonly used in common law jurisdictions—such as convertible notes, simplified convertible preferred shares and SAFE agreements—have helped reduce costs, complexity and negotiation time, their application in civil law environments requires further legal refinement, particularly to ensure compliance with Islamic finance principles.
Under the project, IsDBI and IE University will combine research, comparative legal analysis and contract design to review existing risk-sharing financing models, assess their alignment with Islamic finance principles, and evaluate the feasibility of adapting similar mechanisms to the Spanish legal framework. The initiative will also examine legal and regulatory enablers and constraints that could affect implementation.
Based on these findings, the partners plan to develop a set of Shari’ah-compliant risk-sharing contract models that are fully compatible with Spanish and European Union law. The contracts are intended to be legally enforceable, economically efficient and adaptable for use across EU Member States, as well as in non-European civil law jurisdictions, including North Africa and the Gulf.
Beyond early-stage ventures, the project will also assess the broader application of these instruments in supporting entrepreneurship and promoting more ethical, inclusive and socially responsible economic development.
Commenting on the initiative, Acting Director General of the IsDB Institute, Dr. Sami Al-Suwailem, said the project represents a significant step in strengthening the Islamic finance industry by translating its core principles into legally robust instruments suitable for modern startup ecosystems.
“By anchoring these solutions in European civil law frameworks, the initiative supports the development of Islamic finance in Europe and offers scalable models adaptable to Muslim countries with civil law or hybrid legal systems,” he said.
Dr. Celia de Anca, Deputy Dean and Islamic finance expert at IE University, who is leading the project, said access to appropriate financial tools is critical to entrepreneurial success and sustainable economic development.
“Startups play a key role in innovation and social value creation. Islamic finance offers principles that are highly relevant today, but they require practical and flexible legal instruments that can work across jurisdictions,” she said, noting that the initiative comes at a timely moment with the introduction of the EU-INC framework, which is expected to support the adoption of such legal innovations across Europe.
