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Entrepreneurial finance, agency problems and Islamic ethics: complementarities and constraints

Ahmed, Habib and Aassouli, Dalal (2022) 'Entrepreneurial finance, agency problems and Islamic ethics: complementarities and constraints.', Venture Capital, 24 .


This paper examines the interactions between Islamic ethics related to entrepreneurs and finance and discusses their implications on entrepreneurial finance. The practice of Islamic entrepreneurial ethics creates trust that helps to mitigate agency problems. In such cases, investors can use contracts involving Islamic financial ethics. However, in the absence of the practice of normative entrepreneurial ethics, agency problems arise that need to be resolved contractually. This paper argues that Islamic legal and ethical principles impose constraints on contractual forms which reduce the flexibility of mitigating agency problems arising in entrepreneurial finance. When entrepreneurial ethics are not practiced, investors can finance entrepreneurs by diluting Islamic financial ethical principles to alleviate agency problems.

Item Type:Article
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Available under License - Creative Commons Attribution Non-commercial No Derivatives 4.0.
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Publisher statement:© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (, which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.
Date accepted:12 April 2022
Date deposited:21 April 2022
Date of first online publication:21 April 2022
Date first made open access:24 August 2022

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