The Potential and Challenges of Islamic Bank Financing for Startups through Business Incubators in the Libyan Environment: An Exploration of Challenges and Implementation Prospects

Abstract

This study emerged from the critical challenges faced by the entrepreneurial sector and startups in Libya, particularly their difficulty in accessing traditional Islamic bank financing due to their high-risk nature, lack of tangible collateral, and absence of financial records. Consequently, the research aimed to achieve a primary objective: designing an innovative developmental financing model to enable Islamic banks to play a pivotal role in supporting entrepreneurship. The study adopted a multi-faceted methodology, combining a descriptive-analytical approach to review the theoretical framework and current reality, a deductive-inductive approach to construct the proposed model, and qualitative analysis of data from in-depth interviews with specialists. The findings revealed the limited current role of Islamic banks in Libya in this domain, while also highlighting significant potential for implementing the proposed model, despite existing legislative, institutional, and Sharia-related challenges. The innovative model revolves around integrating Islamic banks with business incubators, supported by the establishment of a national coordination body and a financing guarantee entity. In this model, the bank transitions from a traditional financier to a "developer of investment opportunities," preparing feasibility studies and announcing ready-made opportunities to qualified implementers, thereby mitigating risks and increasing success rates. The study concluded with a set of recommendations, most notably: establishing a supportive legal framework, restructuring financing products based on partnership, adopting a strategic partnership model with incubators, and investing in human capacity building to ensure the successful implementation and developmental impact of this model.