The default of two prominent Middle Eastern investment companies is shaping up to be a test case for the $1,000bn Islamic finance industry on how Islamic bonds, or sukuk, are settled.

Until recently, the market for bonds that comply with Islamic law, or sharia,, was one of the fastest growing niches of the international financial industry, with issuance soaring from virtually nothing less than a decade ago to about $100bn of sukuk bonds outstanding this year.