By Aziz El Yaakoubi

RABAT, June 12 (Reuters) - A subsidiary of Morocco's largest private bank, Attijariwafa, has signed a deal enabling it to offer Islamic financial products to 42 percent of state employees before foreign rivals step in.

Dar Assafaa, which signed the agreement with the Education officer's foundation and its 350,000 members, made its move ahead of approval of the Islamic finance regulating bill, which will allow global Islamic banks to open full-fledged subsidiaries in Morocco.

Morocco's Islamic finance drive accelerated after a moderate Islamist-led government took power through elections in late 2011, and as the government struggles with a huge budget deficit.

The agreement will allow Dar Assafaa to offer the Islamic version of housing loans to the foundation's members, most of whom are teachers.

"We have signed this agreement after strong demand from our members," said Sanaa Hannine of the Mohammed VI foundation.

"We have 350,000 members and only 80,000 have a home loan with our intermediation," she added.

Parent Attijariwafa Bank, the first Moroccan private lender, is controlled by the royal family's investment holding company SNI.

Last January, parliament approved legislation allowing the government and companies to issue sukuk, however it is unclear whether the approval of the Islamic finance regulating bill, which will allow global Islamic banks to open in Morocco, will come before parliament during the current spring session.

"We will submit it to the parliament for approval as soon as possible," Moroccan finance minister Nizar Baraka said in a parliamentary debate on Monday.

Earlier this year, Morocco's central bank started talks with a body of Islamic scholars on establishing a central sharia board to oversee the Islamic finance industry, but a source from the Morocco's higher council of religious scholars told Reuters that things are still at an early stage.

"It is almost impossible to see the Islamic regulating bill approved in 2013," Ali Alami Idrissi, an expert of the Islamic finance industry and the head of Optima Finance Consulting said.

"Even though the political sensitivity of the Islamic finance industry seems behind us, Moroccan banks are pushing to delay the legislation to be more ready to compete," he added.

(Reporting By Aziz El Yaakoubi; Editing by Elaine Hardcastle)

((Aziz.ElYaakoubi@thomsonreuters.com))

Keywords: MOROCCO ATTIJARIWAFA/