Case Study: Pioneering Islamic Banking in the US

Chicago-based Devon Bank is a true pioneer when it comes to Shari’ah finance but it has had to overcome plenty of hurdles along the way, with others still to be crossed.

The bank in the US that has a solid case for claiming pioneer status in Shari’ah finance in that country is to be found in Chicago, Illinois. Perhaps, at first glance, not the obvious place to look for such innovation. However, Devon Bank resides in one of the most ethnically diverse neighbourhoods in the country. The move into Shari’ah financing basically stemmed from customer demand, explains the bank’s corporate counsel, David Loundy. There have been plenty of challenges along the way, as is always the case with pioneers in any walk of life, and there are a fair few still outstanding. But what is clear, as the story unfolds, is that Devon Bank has been pretty good at finding ways around issues or, as Loundy puts it, forcing square pegs into round holes.

This ethnic diversity is reflected in the fact that the bank’s employees are conversant in some 33 languages. The neighbourhood is often a first staging post for immigrants, many of whom ultimately move on. There are large Indian and Pakistani communities, with others from Africa, central Europe and elsewhere.

The first approach to the bank regarding Shari’ah finance came six or seven years ago. This was from a customer who wanted to buy a store front up the street but did not want to pay interest. The customer wanted to know if the bank could help. At that point, the answer was ‘no’. In fact, the only bank in the US that could help at that time was United Bank of Kuwait.

After United Bank of Kuwait was bought out, the customer came back to Devon Bank and asked the same question again. There were beginning to be other enquiries along the same lines as well, so it was felt that this was something the bank should look into. There had been early moves towards developing a solution for these customers but it wasn’t going very quickly, says Loundy.

He was a lawyer and joined the bank at about this time; the bank is family-owned and David is a family member. Given his legal background, the Shari’ah finance challenge was handed over to him. Early and subsequent assistance has come from the Shari’ah Supervisory Board of America, which is conveniently placed just two blocks up the road from the bank. One of its founders helped Devon Bank to get started and also took a keen personal interest as he has a real estate business. At that stage, the Supervisory Board was going to banks to try to attract interest. ‘We were already interested,’ says Loundy.

As the initial products began to take shape, so the enquiries started to multiply. People began asking whether the bank could provide finance for houses and cars, could help with lines of credit, could ‘help their sister in Connecticut’, says Loundy. At first, Devon Bank’s emphasis was on its own neighbourhood, with this having been its sole area of activity prior to the Islamic Finance initiative, but it was quickly pulled into other states and now provides Shari’ah products across more than 35 US states finding itself one of the top providers in the country.

So what have been the challenges? The bank was trying to ‘mesh two legal systems and two financial systems together in a way that made sense’, says Loundy. Other dimensions to the complexity involved were ensuring that the products were correct from a religious perspective while also, of course, commercially attractive. There has been a lot of education required – of the regulators, title companies, attorneys, tax authorities and other relevant parties. With obvious exasperation, he admits that practically everything about every transaction requires explanation.

The banking regulators have been very supportive,’ says Loundy. In part, this is because they see the initiative as helping to bring unbanked individuals into the banking system. ‘They see it as a valuable community service.’ Less positive has been the response at the individual state level. ‘The Secretaries of State are the bane of my existence,’ he sighs. It is hugely difficult to register to do business in each state. This is often nothing to do with Islamic banking per se but rather that the request does not ‘tick any box’, by virtue of being unfamiliar.

'The banking regulators have been very supportive, In part, this is because they see the initiative as helping to bring unbanked individuals into the banking system. ‘They see it as a valuable community service.’

Despite these issues, the bank has been able to develop a wide range of home finance products, with these including the equivalent of fixed rate, bridge financing and so on. However, tax continues to be an issue. It has been an ongoing battle to persuade the IRS (Internal Revenue Service) to respond to the questions being posed, says Loundy. ‘Essentially, they are refusing to answer.’ He says: ‘They know there is an issue, there is probably $1 billion of Islamic paper in the market’. However, for the time being at least, there is no sign of resolution. He feels there is a logical regulatory fix waiting to happen but there currently appears to be insufficient public outcry to bring about the change.

The situation is not as bad at the local tax level. There is the equivalent of the UK’s stamp duty (which needed adapting to pave the way for viable Shari’ah mortgages in the UK; see the interview with Lord Eddie George, 'NewHorizon, April–June 2007' issue) to contend with. ‘Fortunately, in many states, there are ways around it,’ says Loundy. However, where this is not the case, it just adds the basic expense of incurring the duty twice (this stems from the nature of the transaction under Shari’ah principles, which involves initial ownership by a financier).

Education is also needed on the customer side. This encompasses a broad spectrum: some customers have already had conventional mortgages but many have not. ‘A lot have never thought they would be buying a house so have never learnt about the process or about mortgage financing,’ says Loundy. The bank finds that, unlike with many mortgage applicants, the prospective customers will often come in, spend a considerable time talking to the bank, and then disappear for six months. The first point of contact comes not because they have a property in mind to buy but rather because they are exploring whether or not such a thing is feasible. Even on the commercial side, which constitutes a good part of the bank’s Shari’ah business, while the customers are typically ‘savvy business people’, Shari’ah finance still usually falls outside the reach of their expertise.

There has also been the challenge of how to reach a much wider geographical customer base. If a customer is in Chicago and wants a conventional mortgage, they may well turn to Devon Bank. If they are in Texas, they will turn to a bank there. But if they are in Texas and want a Shari’ah mortgage, then they are likely to turn to Devon Bank, explains Loundy. ‘The telephone is a wonderful device,’ he says. The bank has not made its Shari’ah products available via online banking largely because of technical reasons, particularly an inability to make the displays Shari’ah-compliant. Indeed, the bank has had an issue with technology as a whole, so there is more manual effort here than in the rest of its activities. It has developed some software itself but has struggled to find Shari’ah-compliant applications.

Of course, the competition has increased. In some ways, this is good for Devon Bank, because it builds the awareness and maturity of the market. Some areas have become highly competitive, some less so, says Loundy. Residential financing is in the former category, which is one reason for Devon Bank’s broader product set. The ‘800-pound gorilla’ is Fannie Mae, the shareholder-owned entity with a Federal remit to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates in support of home ownership and rental housing. Fannie Mae has decided to make this a focus area as part of its commitment to minority home ownership and is seeking to roll out a uniform product. When this has happened and such finance is available to everyone, then Devon Bank’s differentiators will need to be breadth of product, backed up by quality of service, as the mover benefits will be no more.

One challenge that Devon Bank is particularly trying to overcome at present besets everyone in this space – lack of liquidity. The bank is trying to launch an offshore investment company but this is an uphill task, exacerbated by the subprime meltdown. Any potential investor, says Loundy, can ‘pick up a newspaper and read the headlines’. In reality though, in four and a half years, Devon Bank has had no foreclosures and no write-offs. ‘We have an exceptional portfolio performance.’ The plan is to set up an independent entity called Devon Islamic Ventures Offshore (DIVO) to try to expand the bank’s Islamic financing programme through the creation of a Shari’ah-compliant investment vehicle and the provision of an investment conduit for other Islamic financing ventures.

‘We have got pretty much everything set up and ready except the money,’ he says. DIVO has close ties with the bank but is an independent entity so will have a wider remit, beyond the reach of an Illinois bank. The vision is for a portfolio of Shari’ah-compliant businesses, provided either directly by DIVO or an affiliate, but mostly through equity investments in other providers of such services or in funds operated by such providers. There is already a Devon Real Estate Asset Management company which will eventually have DIVO as a parent and which is focused on real estate-only finance business.

There is a final interesting twist to the story: the Loundys are a prominent Jewish family. The bank itself has been operating since 1945, set up by local merchants, and owned by the Loundy family since 1953. While it might seem a huge leap from the bank’s origins to today’s faith-based banking activities, the latter are in keeping with the caring community bank envisaged by its founders. As the bank says itself within its marketing: ‘There’s no one size fits all when it comes to banking services from Devon Bank.’ Nowhere can that ethos be seen more clearly than in its pioneering Shari’ah finance activities.

Source: New Horison - Global Perspective on Islamic Banking and Insurance

Point of View: Innovations in Islamic Finance

Dr Humayon Dar, Dar Al Istithmar

The explosive growth in the Islamic banking sector over the last few years may soon be replicated in the insurance sector. NewHorizon talks to Dr Humayon Dar, CEO of Dar Al Istithmar, a subsidiary of Deutsche Bank group that provides Shari’ah consultancy services.

The huge demand for Shari’ah-compliant financial services has created innovative service offerings from the Islamic banks. Nowadays, credit cards, car loans and mortgages are all available to private individuals while investment products, many based around the sukuk and investment funds of different types, are available to wealthy individuals and corporate bodies.

The housing market, in particular, has seen tremendous growth according to Dr Dar. Until recently, banks did not offer mortgages to individuals but the liberalisation of the financial market has meant that these products are now available and Islamic mortgages are becoming very popular. Housing markets across the world have expanded but the demand for Islamic home finance has been even further fuelled by the growth in the emerging Muslim economies, particularly those of the Gulf Cooperation Council (GCC) countries.

Dr Dar thinks the positive image that the availability of Islamic financial services sends to the rest of the financial world is enhanced by Islamic scholars working closely with Western bankers in London, New York and elsewhere. There is evidence that wealthy Muslims tend to invest in Shari’ah-compliant financial products when investing locally, although they may be prepared to invest in conventional banking products when investing overseas.

There is nothing religious about Islamic banking – it is a structure that is used to differentiate between halal and haram products.

Some of the devices used to support Islamic products differ from country to country. In response to the rise in demand for credit cards, Islamic banks in different countries have created different models to replicate the economic effects of conventional credit cards. In Malaysia, for example, Islamic credit cards can be supported by the bai al-ina or buyback sale. In this the bank and the client buy and sell a piece of land between them with the difference in the buying and selling prices being used to provide the credit limit on the credit card.

This is the model used by Bank Islam Malaysia Berhard, the largest Islamic bank in that country. In the Middle East the more popular contract is the tawaruq which is similar to the bai al-ina but there are three parties involved in the buying and selling of the underlying asset: the bank, the client and a third party often found through the general marketplace.

In the UAE, credit cards are often provided as a fee-paying service with no underlying transaction. Banks provide different classes of card – gold, platinum, etc. – based on the client’s income with different fee brackets based on the type of card.

The explosive growth in demand, and the fledging nature of the Islamic financial market means that, as yet, not all business areas are fully serviced. An example of a relatively difficult area is the Treasury Operations function within a bank or large corporation. According to Dr Dar these money market operations are an ‘Achilles’ heel’ of Islamic banking and are a rather more complex area in which to achieve compliance.

In conventional banking circles a bank with excess liquidity will lend to another bank through inter-bank loans. To achieve the same function while still being Shari’ah-compliant, most Islamic banks will use a commodity murabaha. In this both banks instruct a commodity broker – bank A will instruct the broker to buy, say, $100 million of commodity and sell it to bank B on a deferred payment basis. Bank B retains the funds obtained from instructing the broker to sell the commodity for cash on the open market. Repayment occurs at a predetermined frequency agreed by both banks. The sukuk is becoming more prominent in this market, particularly those issued in Malaysia and Bahrain, and this area may present future innovations.

Islamic banking so far has not shown an explicit responsibility towards the community in which it serves so possibly this will be the next step – the emergence of banks that are genuinely socially responsible.

Dr Dar feels that the real growth area is occurring in Islamic insurance or takaful which until recently has been a relatively untapped market. Some analysts think that this sector may prove to be bigger than Islamic banking.

Part of the demand for these products is in response to directives from financial institutions. If an individual obtains financing from a bank for a car or a home, the bank makes it compulsory to obtain insurance. Some of the large Western banks are aggressively entering this market. For example, HSBC Bank Malaysia Bhd has announced that in the next two years it aims to at least double the amount of insurance products used by its existing customers. Currently, around 30 per cent of its customers use insurance products.

The reinsurance market, where insurance companies spread the risk among specialist underwriters, may also present a growth area. Although there are four or five small Islamic reinsurance companies, it is still largely dominated by conventional insurance organisations.

The emphasis in Islamic banking up until now has been on the Shari’ah compliance aspects and whether the underlying contract complies with the law. This is not necessarily ethical banking though, explains Dr Dar. There is not much similarity between Islamic finance and ethical investments or socially responsible investing.

Ethical banking has more of a Western influence. As an example, the Dow Jones screening for Shari’ah-compliant companies includes companies that are doing prohibited business, such as making or distributing alcohol, or casinos. But there are others which are strange from an Islamic point of view such as tobacco or the defence industry. ‘There is no consensus in Islam about tobacco,’ says Dr Dar ‘but Islamic funds will not invest in tobacco because it is considered unethical – an inference that has come from Western influence’.

Dr Dar feels that the next big event in Islamic banking may be what some people refer to as ‘real’ Islamic banking. The existing attempts to conduct business in a Shari’ah-compliant way could be called ‘halal’ banking rather than Islamic banking. There is nothing inherently Islamic about the operations of Islamic banks. They are simply doing business in compliance with Islamic law. Islamic banking to some people implies a social responsibility.

‘Islamic banking so far has not shown an explicit responsibility towards the community in which it serves so possibly this will be the next step – the emergence of banks that are genuinely socially responsible,’ says Dr Dar. ‘Co-operatives and mutuality have gone out of fashion in the UK but it is something that is needed in some countries.’ Dr Dar goes on to say that ‘there is nothing religious about Islamic banking – it is a structure that is used to differentiate between halal and haram products’.

After such an explosive growth period in Islamic banking, it may be time to pause for reflection while the insurance sector takes up the financial expansion.

Source: New Horison - Islamic Perspective on Banking and Insurance

Lord Eddie George - The steady hand behind Islamic finance in the UK

By Tanya Andreasyan

New Horizon met with Lord Eddie George, former Governor of the Bank of England last month. Amidst many achievements, there is no doubt that paving the way for the introduction of Islamic mortgages is something that he looks back on with pleasure and pride. Over an hour and a half, he talked to NewHorizon editor, Tanya Andreasyan, IBS’s founding editor, Martin Whybrow, and former founding CEO of HSBC Amanah and chairman of the executive committee of Jadwa Investment Bank, Iqbal Khan, about the original drivers, the hurdles and the influences for this important element of Shari’ah banking. Where the UK led, others have now followed.

A pivotal individual in terms of laying the foundations for Islamic mortgages in the UK (and beyond) is Lord Eddie George. During his time as Governor of the Bank of England, he helped pave the way for this important cornerstone of Shari’ah-compliant banking. Looking back on these efforts, he is quick to emphasise the team effort behind the development but, nevertheless, the senior backing that he provided was clearly vital to the success of the initiative. Under his steadying hand and guiding influence, all of the necessary elements to turn the dream into reality were put in place.

Having retired in June 2003 after ten years as Governor and 40 years at the Bank, Lord George is now in an ideal position to look back on the evolution of Shari’ah banking in the UK during that time, and to put this into context in terms of other major changes within the country’s banking sector over that period. The tale that Lord George recounts of his initial interest in Islamic banking goes back to before his time as Governor. He met what he describes as a delightful Muslim couple who had just bought their first house. They told him of their happiness with their new home but there was one problem which was preying on their conscience. This was the fact that they had had no option but to take out a conventional mortgage and they explained their issues and sadness. ‘I couldn’t think of any rational reason for this,’ says Lord George. The country has a terrific reputation for innovation, so surely it could find a way to meet this need, he felt.

Lord George looked into the matter at that stage and identified one issue to be the lack of standardisation. Many of the existing financial products seemed to have at least some of the characteristics consistent with the teachings of the Quran and it did not seem too difficult to fit Shari’ah-compliant products into the UK’s legal framework. However, a better and more precise understanding of Islamic banking products was needed, as well as, in the immature area of mortgages, a more consistent and standardised specification of the products required by the Islamic community.

‘There were no really standard products, so we couldn’t identify a Shari’ah mortgage. It was hard to fit this into the regulatory and legal framework because the definition of a Shari’ah mortgage differed from one place to the next.’

The next milestone came out of the Bank of England’s ‘Heart of the City’ charity which was set up in 2000. The overall aim was to encourage City companies to work with surrounding boroughs, many of which are relatively poor. In parallel, Dr Pasha, General Secretary of the Union of Muslim Organisations of the UK and Ireland, had raised the subject once more of Islamic mortgages with Lord George. Out of this came the idea to set up a working group dedicated to this subject within the Heart of the City initiative. Having discussed the subject with Gordon Brown, at that time the Chancellor of the Exchequer, Lord George invited Andrew Buxton, who had an interest in Islamic finance, to convene the group. Buxton was Chairman of the Heart of the City campaign and a former Chairman of Barclays.

The working group included representatives from the Treasury and the FSA (Financial Services Authority, the industry regulator), as well as the Council of Mortgage Lenders and a number of banks, including Ahli United Bank, HSBC and Barclays, plus lawyers and representatives from the Muslim community. There was a fairly long list of obstacles, says Lord George. Particularly thorny was the issue of stamp duty, with the need to ensure that Shari’ah mortgages did not incur this twice because of the nature of the transaction, involving initial ownership by a financier. ‘We couldn’t unhinge the stamp duty process as a whole,’ but a workable solution was ultimately hammered out with the Treasury.

There was also a need to ensure that disadvantages were removed within the ‘Right to Buy’ or ‘Right to Rent’ public home ownership schemes, so that the role of a financier did not mean that Muslim buyers were excluded from the benefits offered by such schemes. There were many ambiguities and a large part of the effort was tracking down and resolving these. ‘No one had really done this before,’ says Lord George.

There was a lot of enthusiasm which was extremely encouraging, says Lord George. It was felt that this was the right thing to do, with the UK having a tradition of being receptive and supportive of different religions and societies, and with the Shari’ah mortgage project another demonstration of this. The effort was helped by the fact that it was clear that Shari’ah banking as a whole was growing quickly. It was also felt that with mortgages, as with other Islamic products, demand might not come purely from the Muslim community.

The first working group was hosted by the Bank of England, and Lord George did not miss a single meeting... The efforts were deeply appreciated within the Muslim community... The work would allow UK Muslims to be both more Muslim and yet at the same time more British in their country.

While Lord George is quick and fulsome in his praise of other individuals involved in the work, there is no doubt that his own role was vital. Iqbal Khan points out the importance of Lord George’s patronage and involvement. The first working group was hosted by the Bank of England, and Lord George did not miss a single meeting, he recalls. The efforts were deeply appreciated within the Muslim community, he points out, with the project attracting a lot of focus. He recalls the Imam of his own local mosque making a telling point: the work would allow UK Muslims to be both more Muslim and yet at the same time more British in their country. It was a similar theme in mosques around the country, with prayers for the success of the scheme, he says.

It is also worth pointing out that the efforts were not solely of importance to the UK. Indeed, far from it. Khan cites the press coverage that the initiative generated across the Muslim world. Many countries were lagging behind and did not have the regulatory framework themselves. In fact, the UK work led to changes elsewhere, influencing regulations in Malaysia and Brunei, among other countries.

Bank of England
The Bank of England traditionally has very good relationships with other central banks, says Lord George. This is partly historical and partly through proactive means. For instance, Bank of England staff are encouraged to spend time outside the UK (Lord George himself spent a formative year in Moscow in the mid-1960s, where he saw at first hand what he describes as the Soviet ‘disconnect’ between the banks and industry). The Bank of England also introduced an annual conference for Commonwealth central banks, with this subsequently having been broadened to developing countries as a whole. And it set up the Institute of Central Banking Studies which, says Lord George, has played a very important role in Islamic finance as well.

Although Ahli United Bank, formerly United Bank of Kuwait, has been offering Islamic mortgages in the UK since the late 1990s, it was the Finance Act 2003 that really opened the door to Shari’ah-compliant mortgages providing impetus in this niche of financial markets by levelling the playing field for Islamic mortgages regarding stamp duty. As a result, other players like HSBC Amanah, Alburaq, Islamic Bank of Britain and Lloyds TSB entered the arena providing competition and increasing awareness to customers on a wider level. The work did not stop with mortgages, of course, with the ongoing evolution of areas such as Shari’ah-compliant pensions, sukuk trading and private equity, but the pioneering work in mortgages laid the foundations for further progress at home and abroad. In the UK itself, Shari’ah banking as a whole has been helped by the favourable environment, as reflected in Gordon Brown’s vision of Britain as a centre for Islamic finance.

In terms of the bigger picture, it is unlikely that the Bank of England would have taken such a lead in the past. When Lord George first joined the institution, it had a purely administrative role, implementing direct control of the economy on behalf of the government. It is easy to forget, even for those who were around at the time, that the UK’s economy was extremely cyclical, lurching from ‘boom to bust’ with interest rates that Lord George calls ‘extraordinary’ and with a trade-off between growth and inflation. Inflation was rampant and interest rates could move two per cent on one day.

The efforts were not solely of importance to the UK... In fact, the UK work led to changes elsewhere, influencing regulations in Malaysia and Brunei, among other countries.

The cycles were more pronounced than in other developed economies and, over time, the troughs were becoming deeper and the peaks higher. ‘We were looking over a precipice; there was a gradual realisation that this was not the way forward.’

The need for change opened the way to a clear shift in the role and position of the UK’s central bank, with a loosening of the political constraints that it was working under. Independence for the Bank was something that happened much faster than Lord George expected. He had discussed it with Gordon Brown and there was agreement on the matter but he expected it to take two or three years; in fact, it was set in motion four days after the new Labour government came into office. Transparency and public accountability were notable parts of the change, with Lord George pushing through the publishing of the minutes of the Bank’s meetings.

Fifteen years ago, the UK was one of the worst performers of the industrial countries; today it is one of the best. There was no one particular factor, rather a combination. The transformation was not overnight but was still relatively swift in economic terms. Now, Lord George pronounces himself ‘very optimistic’ about the UK economy. Although clearly keeping busy and ‘interested in all sorts of things’, he made a definite decision to ‘pull right back’ from the Bank of England when he retired, confident that the Bank was in excellent hands under his successor, Mervyn King (‘a first rate economist’). He laughingly says he misses the ‘molly-coddling’ of his staff at the Bank but other than that he is obviously enjoying life and still keeping a keen watching brief on the ongoing evolution of Shari’ah finance.

Source: New Horison - Islamic Perspective on Islamic Banking and Insurance

The Origin of Life - an Islamic Perspective

Science must increase our faith. It is wrong for anyone to close their eyes to what is right in front of them. For a Muslim the evidence of dinosaurs and fossils is not a threat to our beliefs. Rather, it is a confirmation of the power of Allah.

Adapted from the Book: "What Islam is All About" By Yahiya Emerick


A. Why Does Allah Tell Us About the Creation?

The Holy Qur’an is the book given to us by the Creator of the Universe. Allah, (literally: THE God) which is His personal Name, knows us best and is aware that humans can be very skeptical creatures.

Allah points out, "...if you were to seek a tunnel into the earth or a ladder into the skies and bring them a sign, (they still wouldn’t be convinced.) If it were Allah’s will, He could gather them all into true guidance, so don’t be among those who are influenced by ignorance." (6:35)

Allah, the Keeper of Wisdom, makes it a point to give as many proofs in the Qur’an about His existence and creative abilities as possible so the maximum number of humans can be guided. We need proof, and Allah gives us that proof. (2:26, 40:57)

Allah, of course, does not need us to follow Him, or believe in Him. As He states, "Allah can do without them and Allah is free of all needs." (64:6)

He merely wishes that people would choose to believe in Him so He can reward them for their choice. Allah is ready to forgive even those who acted wrongly if they but ask for His forgiveness.

In a Hadith, or saying of the Blessed Prophet Muhammad, we learn, "When Allah decreed the creation (of the universe,) He set down in His book which is with Him, ‘Indeed, My mercy is stronger than My wrath.’" (Bukhari & Muslim. Also see 6:12)

Among the proofs given in the Qur’an for us to learn from is a very detailed explanation of the different features of the universe, how it was made and how the planets and stars were formed. Allah says that, "To Him is due the origin of space and the Earth." (6:101)

Of course, most people who lived at the Prophet’s time would never have understood what those ayat really meant, but they accepted them anyway and interpreted them as best they could. Sometimes they came up with very interesting explanations.

Allah instructs us to accept everything in the Qur’an, even if we don’t yet know how to understand it. The understanding of the Qur’an grows with each passing generation. As He said, "The intelligent people declare, ‘We believe in the book, the whole of it is from our Lord." (3:7)

B. Modern Science and Islam.

Modern day scientists have been awe-struck at how complex and intricate the universe is. (67:3-4) The sciences of astronomy, chemistry, astrophysics and molecular biology have pushed the limits of our knowledge ever further.

These new discoveries have assisted greatly in the understanding of what the ayat in the Qur’an mean. For example, there is a section of verses where Allah mentions that during the process of human development, there is a stage where we were an ‘Alaq in the womb. (96:1-5) The word literally means, "a clinging thing." But no one knew in past centuries how that could be part of the process of growth for a fetus.

So translators, commentators and scholars have tried to explain it as meaning we were clots of blood or other such strange things in the womb. But new discoveries in the last few years have shown that in the early stages of pregnancy, the fertilized egg actually attaches itself to the uterine wall and clings there as it is growing. Thus, modern knowledge unlocks another mystery that previous Muslims could only guess at.

The same thing is true in other areas to quite a startling degree. When we study the ayat of the Qur’an relating to the creation of the universe, we come away astounded, especially since they agree with what we have only discovered in the last ten, twenty and fifty years.

The Qur’an does not give a single, unified essay on how the universe began. Instead, keeping with the Qur’anic method of teaching, different aspects of creation are mentioned in different places in order to give authority to the particular lesson being taught. (See 30:58)

For example, in Surah at Tariq, (86) Allah begins by mentioning the brightest star which appears in the sky at night. Then He describes this star and uses it as a metaphor for how every human has an angel watching over them. Do you see how Allah uses physical aspects of nature to illustrate spiritual principles?

C. The Qur’anic History of Creation.

After we find the references to creation in the Qur’an, then we can piece them together to get a picture of how Allah’s revelation explains the beginning. As Muslims, however, we must not forget to look into the lesson taught in each passage. We must remember what the purpose is for including these signs in the Qur’an so we can be enlightened spiritually as well as mentally.

Allah begins by stating that the universe and planet Earth took six "days" to create. (7:54) Now it must be remembered that in Arabic the word Youm can mean a day as we know it, or it can mean any stage or period of time. As Allah points out, a day to him can be a thousand years, fifty thousand years or more.

The creation of planets and the Earth took place in the last two periods of time. As Allah states in the Qur’an, "Declare, ‘Do you disbelieve in the One Who created the Earth in two stages? Do you make others equal to Him? He is the Lord of all the worlds.’" (41:9)

The process of creation can be summarized as follows: All matter in the universe was compacted together in one place. Then Allah gave the command and it blew apart scattering molecules and gases in all directions. ("The Big Bang.") The force of this initial explosion keeps the universe expanding.

Space was filled with matter, anti-matter and gases which eventually combined into larger particles. These bits of matter eventually grew into asteroids, planets, stars and moons. Each object of inter-stellar space conformed to a set of physical laws which governed the trajectory of their orbits so a regular pattern of rotation could be seen. (21:33, 29:61)

Stars ignited in a fury of radioactive fusion and gave off light and heat which brought warmth to those planets near them. (86:3) Small moons were captured in the orbit of larger planets and came to have a regular orbit around them, often reflecting light from the sun. (54:1-2)

Finally, the planets themselves developed and formed in a variety of ways with fantastic geologic formations and movements both above and below the surface. (27:61)

The planet Earth, in particular, cooled near its outer layers, forming a thin crust made up of plates that moved and grated against each other. (15:19) This allowed the Earth’s surface to constantly erase the damage caused by occasional asteroid impacts. But the colliding of the plates also had the side effect of raising tall mountains and exposing the geologic history of the planet.

Escaping gases from the ground and water, warmed in the sunlight, eventually raised to a high altitude where they formed a protective layer. This Ozone Layer shielded out harmful radiation and ultraviolet rays from the sun.

After a time, life was to appear but that is the subject of the next lesson. For now, it is amazing that this scientific narrative is almost exactly the same as what Allah revealed in the Qur’an. Look at the following illustrations showing what happened, what Allah said about it, and the ayat from which they come.

You will be amazed and can only proclaim your wonder at Allah’s Revelation. Remember, He mentioned these things to teach us to be believers in Him. If He tells us the truth, we would be fools not to believe in Him. Right?

"Don’t they see anything in the functioning of space and the Earth and in all things Allah created?" (7:185)

D. How Can We Know the World Around Us?

As we have learned already, Islamic teachings assume that the Earth and universe are very old. In addition, the Qur’an states clearly that one of the reasons Allah made us intelligent and self-aware, or Sentient, is so that we can discover the wonders of the natural world around us. In short, Allah gave us the mission to investigate what He created.

There is so much we don’t know or understand, even about how our own bodies work. With all these fantastic areas of knowledge to pursue, you would think that everyone would recognize their Lord. But some still choose to keep their eyes shut. As Allah says, "He, (Allah,) created humans from a drop of sperm and then the same humans become clear arguers!" (16:4.)

But thankfully, not everyone closes their understanding and the world has many fine examples of great scientists and researchers who also put their trust in Allah.

In our modern world there are so many discoveries in all fields which are giving us a more complete picture of the history of the universe. At the same time, our knowledge of Earth’s past is expanding and revealing some surprising results.

E. What Do We Know about the Origins of Life?

Today, scientists tell us that life began in the sea when simple molecules bonded together and became self-replicating, or self-producing. These single-celled organisms, quickly took on the characteristics of what we know as algae.

They received their energy from the sun in a process termed Photosynthesis, and as a result of their activity, new gases formed in the air creating a viable environment for more complex forms of life.

As Muslims we can either accept this theory, reject it or modify it according to what we know in Allah’s revelation. As you will remember, we learned that Allah said He created all life from water and raised a protective canopy over the Earth. Allah knows best and all we can do is study, research, test and reflect.

Scientists further tell us that over millions of years, the first organisms blossomed gradually into many different types and shapes, resulting in plant life, plankton, arthropods and simple fishes. Dinosaurs, higher creatures and mammals followed.

F. What is Evolution and Creationism?

These discoveries in themselves are not harmful to a healthy belief in Allah’s creative power to make whatever He wills in whatever way He wishes. But some scientists have tried to say that everything in the universe, even life itself, happened all by chance and accident, without any Divine intervention.

The name of this theory is Evolution and its most famous advocate was a man named Charles Darwin (1809-1882). He was an Englishman who lived during the nineteenth century when Britain ruled most of the world.

He was keenly interested in the origin of life and took a journey around the world to study the plants and animals of Earth. The ship he sailed on was called the HMS Beagle. He spent a particularly long amount of time on the Galapagos Islands, located in the Pacific ocean, examining birds, lizards and giant turtles.

He came to believe that the variety of life in our world was due to what he called "Natural Selection" and "Survival of the Fittest." He wrote his findings in a book entitled, "On the Origin of Species" which he published in 1859.

The book immediately caused a controversy in the Christian world because Christianity taught that God made life in an instant and that Earth was the center of importance in the universe. Christians also felt threatened by Darwin’s teachings because they knew it meant he was saying everything happened without needing God. To this day, many Christians still oppose and do battle in court over whether or not these theories should be taught in school.

These Christians advance the counter- idea of Creationism, or God making things all at once, while modern scientists still promote Evolution, or things happening by themselves accidentally, gradually and naturally. The two sides are as far apart as ever.

G. What Do Muslims Believe?

Where do Muslims stand? The answer may surprise you for we can agree with aspects of both sides. Islam teaches us that Allah’s creation is vast and beyond our comprehension. We are also taught that the more we explore and learn, the more we will come to believe in Allah. That is the Islamic position.

So we assert without any hesitation that Allah caused the creation of the universe and that He set up the laws for its functioning. As Allah said:

"Behold! In the creation of space and the Earth and in the changing of night into day are indeed signs for people of understanding. Those who remember Allah standing, sitting and lying down, and contemplate the (wonders) of creation in space and the Earth. (They declare,) "Our Lord! You didn’t create all of this for nothing. So save us from the punishment of the fire." (3:190-191)

Science, then, must increase our faith. It is wrong for anyone to close their eyes to what is right in front of them. For hundreds of years people have been finding fossils, bones and ancient artifacts which point to a hidden past we don’t know much about. Allah even commands us to travel over the Earth and learn from what we see. We humans have now seen much to challenge our understanding!

We know that Earth existed long before the appearance of humans. Allah says, "Wasn’t there a long period of time before humans were even mentioned?" (76:1)

We also know from the geologic timetable that the Earth went through many ages before we came here. And in the ayat that mentions this proof of Allah, we are given a very strong clue about the adaptability of life forms to their environment.

Allah said, "Don’t you see that Allah sends rain from the sky? With it We produce plants of various colors. And in the mountains are colored layers, white and red of various tones and some black in hue. And so too, among humans and crawling creatures and cattle. They are of various colors. Those among Allah’s servants who have knowledge truly fear Him, for Allah is Mighty and Forgiving." (35:27-28)

So while we agree with the Creationists who say Allah made the universe, we disagree with them on how fast it was constructed and that Earth is the only center of focus for the Creator. Allah declares Himself to be the Lord of All the Worlds: Rabb ul Alameen.

Because we do not reject the evidence presented to us by Paleontologists (fossil hunters) and other scientists, we can accept some of what they say, also, about the origins of life on Earth and the existence of dinosaurs and other creatures in the fossil record. However, we read in Allah’s book that He caused it to happen and that by studying it we increase our faith in Him. Therefore, we disagree with those who say everything happened without Allah, by mere chance only.

"To Allah belongs the control of space and the Earth and Allah has power over all things." (3:189)

Ours is the middle position even as Allah said we were created to be the middle community: never going to extremes. (2:143)

So we don’t accept, based on the evidence, the final positions of both sides. Rather, we accept what appears to be true and reject what appears to be false from each. The Qur’an is our standard, our determiner, and it has never let us down, nor will it ever do so.

For a Muslim, then, the evidence of dinosaurs, trilobites and ancient algae is not a threat to our beliefs. Rather, it is a confirmation of the power of Allah. As Allah said, "He has created horses and mules for you to ride and show; and He has created other (creatures) that you don’t know." (16:8)

"Allah created every creature from water. Of them are some that creep on their bellies, some that walk on two legs and some that walk on four. Allah creates what He wills for He has power over all things. We have indeed sent signs that make things clear and Allah guides whom He wills to the straight way." (24:45-46)

Who else but Allah could have made such a complex and mysterious universe? (16:40) We must have pity on those who reject the proof of Allah’s existence for they will be the losers in the end.

Remember the ayah that was listed before: Allah says, "He, (Allah,) created humans from a drop of sperm and then the same humans become clear arguers!" (16:4.)

Even a miraculous thing such as the fertilization of the egg cannot convince some people to believe in the creative energy of the Creator of the Universe.

Allah asks rhetorically, "Then what message will they believe in after this?" (77:50)

Source: IslamforToday