* Bill will allow Islamic banks and corporate Islamic debt
* Needs final approval in second house in coming weeks
* Morocco hopes Islamic finance will attract Gulf money (Add details and background)
RABAT, June 25 The first house of Morocco's parliament approved a bill to allow the establishment of Islamic banks and enable private companies to issue Islamic debt on Wednesday after months of delays.
The bill still needs to be passed in a final vote in the second house in the coming weeks.
Morocco has been seeking to develop Islamic finance for about two years, partly as a way to attract Gulf money and fund a huge budget deficit. But the sensitivity of the Moroccan political elite to Islamism has repeatedly delayed the plans.
Lawmakers in the first house voted unanimously in favour of the law on Wednesday.
"The bill has passed (in the first house) by 75 votes and no one was against it," Said Khairoune, the head of parliament's economics and finance committee, told Reuters.
The bill will allow foreign banks as well as local lenders to set up Islamic banks in Morocco.
The central bank has started to set up a central sharia board with the country's body of Islamic scholars to oversee the Islamic finance sector.
Seven scholars and financial experts have started training to become members of the board, sources have told Reuters.
The political momentum behind Islamic finance has increased since a moderate Islamist-led government took power through elections in late 2011. Moroccan financial markets suffer from a lack of liquidity and foreign investors and Islamic finance, or sukuk, issues could attract money from wealthy Islamic funds in the Gulf.
Last year, Morocco approved legislation allowing the government to issue sovereign sukuk, although it has yet to do so.
A Thomson Reuters study of Morocco, released in April, estimated Islamic banks could account for between 3 and 5 percent of the country's total banking assets by 2018, or about $5.2 billion-8.6 billion. That would still be very low compared to the developed markets of the Gulf where they account for about a quarter of banking assets.
Islamic banks will be called participative banks under the Moroccan legislation.
In 2010, Morocco began allowing conventional banks to offer a limited set of Islamic financial services, which obey principles such as a ban on the payment of interest. However, they failed to take off because of the high prices of Islamic products. (Reporting By Aziz El Yaakoubi; Editing by Susan Fenton)