Jeddah, Saudi Arabia and Madrid, Spain: The Islamic Development Bank Institute (IsDBI) and IE University Spain, through the IE Foundation, and have launched a joint initiative to design contract models grounded in European legal frameworks and compatible with Islamic finance principles, with the objective of facilitating investment in startups.

The project focuses on identifying and structuring financing instruments adapted to the needs of early-stage ventures operating in civil law systems. Contractual solutions widely used in common law jurisdictions, such as convertible notes, simplified convertible preferred shares, and SAFE agreements, have proven effective in reducing cost, complexity, and negotiation time. However, their application within civil law frameworks requires further legal development, particularly to ensure compatibility with Islamic finance principles.

Within this framework, the initiative combines research, comparative legal analysis, and contract design to review existing risk-sharing financing models, assess their alignment with Islamic finance principles, and examine the feasibility of adapting comparable mechanisms to the Spanish legal framework. Particular attention is given to identifying enabling factors as well as legal and regulatory constraints that may affect their implementation.

Building on this analysis, the project will develop a set of Shari’ah-compliant risk-sharing contract models fully compatible with Spanish and European Union law. These models are conceived to ensure legal enforceability, economic efficiency, and adaptability for use across EU Member States and, more broadly, in non-European civil law jurisdictions, including North Africa and the Gulf.

The project also evaluates the potential of these instruments beyond early-stage ventures, with a view to supporting entrepreneurship more broadly and contributing to more ethical, inclusive, and socially responsible economic development.

“This project represents an important step in strengthening the Islamic finance industry by translating its core principles of risk sharing, fairness, and real economic activity into legally robust instruments suitable for contemporary startup ecosystems,” said Dr. Sami Al-Suwailem, Acting Director General of the IsDB Institute. “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, reflecting IsDBI’s commitment to ethical, inclusive, and innovation-driven finance at a global level.”

Dr. Celia de Anca, Deputy Dean and expert in Islamic Finance at IE University, who is leading the development of this project, said. “Ensuring that entrepreneurs have access to suitable financial tools is essential for the success of their ventures and for the sustainable development of local and regional economies.

“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 different jurisdictions. This initiative responds to that need and comes at a particularly relevant moment, with the new EU-INC (European Inclusive Company) framework, which will greatly facilitate the adoption of these legal innovations across Europe.”

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About the Islamic Development Bank Institute

The Islamic Development Bank Institute (IsDBI) is the knowledge beacon of the Islamic Development Bank Group. Guided by the principles of Islamic economics and finance, the IsDB Institute leads the development of innovative knowledge-based solutions to support the sustainable economic advancement of IsDB Member Countries and various Muslim communities worldwide. The IsDB Institute enables economic development through pioneering research, human capital development, and knowledge creation, dissemination, and management. The Institute leads initiatives to enable Islamic finance ecosystems, ultimately helping Member Countries achieve their development objectives. More information about the IsDB Institute is available on https://isdbinstitute.org/

About IE University

IE University promotes positive change through education, research, and innovation. The academic institution offers a technology-based learning ecosystem for leaders with a global vision, an entrepreneurial mindset, deep respect for diversity and sustainability, and a unique focus on the humanities. IE University is comprised of six schools, IE Business School, IE Law School, IE School of Politics, Economics and Global Affairs, IE School of Architecture and Design, IE School of Science and Technology and IE School of Humanities. IE University faculty produce research and teach students from 160 countries in Bachelors, Masters and Executive Education programs. IE University's platform of more than 84,000 alumni is present in 185 countries.