Or, as Usmani wrote, Islamic financial institutions, in an attempt to compete in "the conventional, interest-based marketplace," have churned out products that give lip-service to Islam while using "ploys that sound minds reject and bring laughter to enemies."

Such statements by Usmani, who is the powerful chairman of the board of Islamic scholars at the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions, sent a chill through the sukuk market.

A clarification in February by the entire A.A.O.I.F.I. board outlining more clearly how sukuks could stay in compliance didn't provide much reassurance.

The effect on financing has been measurable. So far this year, only about $14 billion in Islamic bonds have been issued, compared with around $23 billion during the same time frame last year, according to Standard & Poor's. That is a decline of almost 40 percent.

Noting the "confusion" over what scholars will deem to be acceptable Islamic debt structures, Jaime Sanz of Fitch's emerging markets structured-finance team wrote in a recent research note that "a liquid, transparent, and efficient" Islamic debt market "is of paramount importance" as countries including Saudi Arabia and the United Arab Emirates face the need for "substantial" infrastructure investments.

While much of the Middle East's development still relies on conventional finance, the $70 billion Islamic bond market has grown rapidly thanks to the huge influx of petrodollars and the greater interest in Shariah-compliant investing among Muslims.

"Just as there are more women wearing veils, there are more people interested in Islamic products," says Professor Ibrahim Warde, of the Fletcher School of Law and Diplomacy at Tufts University. The sukuk market, he adds, is just part of a $900 billion Islamic financial sector that grew about 37 percent in 2007.

Those assets have attracted Western bankers looking for a foothold in the Middle East, and Western institutions looking for diversification with attractive yields. Just "10 or 15 years ago, many Western institutions would not have been interested in Islamic finance because it looked too complicated," Warde says. But now, Western banks like J.P. Morgan, Citigroup, and Morgan Stanley are among the leading underwriters in the Islamic bond market.

That market has become the spine of the Islamic insurance industry, a catalyst for the development of the region's capital markets, and has funded the development of everything from Bahrain's financial center and Dubai's Palm development to Emirates Airlines' expansion and a Kuwaiti-led consortium's leveraged buyout of British sports-car maker Aston Martin.

Sukuks have also begun to be floated in Western markets and are backing Western assets. The German state of Saxony-Anhalt and the World Bank have both issued sukuks, while a small Texas oil and gas exploration firm called East Cameron Partners issued an Islamic bond backed by some of its offshore Louisiana gas reserves.

Standard & Poor's estimates that the sukuk market will exceed $100 billion by 2009, even with the latest hiccup. But the Islamic bonds that will be floated are unlikely to push the envelope in the ways others did before, and the innovation that helped sukuks gain acceptance in an ever-growing universe of deals could slow.