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Sharia Oikonomia Law JournalSharia Oikonomia Law Journal

The rise of startups in Indonesia has created a growing demand for innovative financing models that align with Shariah principles. Shariah-compliant venture capital (SCVC) offers a unique opportunity to support startups while adhering to Islamic ethical standards, such as the prohibition of riba (interest) and gharar (uncertainty). This study explores the potential of SCVC as a financing model for startups in Indonesia, focusing on its alignment with Shariah principles, its impact on startup growth, and the challenges faced by stakeholders. The research aims to identify effective strategies for implementing SCVC and propose recommendations for enhancing its role in fostering ethical and sustainable entrepreneurship. Using a mixed-methods approach, this study combines quantitative analysis of startup financing data with qualitative interviews with venture capitalists, Shariah scholars, and startup founders. Data were analyzed to assess the compatibility of SCVC with Shariah principles, its financial performance, and its contribution to startup success. The findings reveal that SCVC can effectively support startups while adhering to Islamic ethics, but challenges such as limited awareness, regulatory gaps, and risk-sharing complexities hinder its widespread adoption. The study concludes that promoting SCVC in Indonesia requires targeted strategies, including education, reforms, and capacity-building for stakeholders. This research contributes to the discourse on Islamic finance and entrepreneurship by providing practical recommendations for policymakers and practitioners to foster ethical and sustainable startup ecosystems through SCVC.

This research highlights the potential of Shariah-compliant venture capital (SCVC) as a viable financing model for Indonesian startups, particularly those in sectors aligned with Shariah principles.SCVC-funded startups demonstrate higher revenue growth rates, indicating the effectiveness of Shariah-compliant financing in supporting early-stage ventures.However, challenges such as limited scalability, regulatory constraints, and access to follow-on funding hinder its full potential, necessitating targeted strategies to enhance the SCVC ecosystem and promote ethical and sustainable entrepreneurship.

Further research should investigate the development of standardized Shariah compliance frameworks specifically tailored for venture capital investments in Indonesia, addressing the complexities of risk-sharing and contract structures. Additionally, studies could explore the potential of integrating digital technologies, such as blockchain, to enhance transparency and efficiency in SCVC transactions, fostering greater trust and participation from investors and entrepreneurs. Finally, a comparative analysis of SCVC models across different Muslim-majority countries could identify best practices and inform policy recommendations for strengthening the Indonesian SCVC ecosystem, ultimately promoting a more inclusive and sustainable startup landscape by examining the impact of government incentives and regulatory reforms on SCVC adoption and performance.

  1. Smart contract-based Islamic Fintech model for Mudaraba financing | International Journal of Business... inderscienceonline.com/doi/abs/10.1504/IJBIR.2025.144391Smart contract based Islamic Fintech model for Mudaraba financing International Journal of Business inderscienceonline doi abs 10 1504 IJBIR 2025 144391
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