Morocco's government has adopted a bill to regulate Islamic insurance, legislation that will face a final vote by parliament later this year, a cabinet statement said.

It is the last step in Morocco's legislative package to regulate the country's fledgling Islamic finance industry. Earlier this year, it issued a decree allowing the creation of a sharia board to oversee the sector.

Islamic finances, which ban interest payments and pure monetary trading, have been growing across Asia, Middle East and Europe.

Sensitive about Islamist ideology, Morocco has long rejected the idea. But the country's financial market lacks liquidity and foreign investors, and Islamic finance could attract both.

Takaful, or Islamic insurance, is seen as a bellwether of consumer appetite for Islamic financial products. It is based on the concept of mutuality and the takaful company oversees a pool of funds contributed by all policy holders.

The bill adopted by the government goes into details on authorisations, takaful and retakaful products and operating process. Sharia-compliant insurance will be overseen by the same sharia board of Islamic scholars in charge of Islamic banking.

The bill also includes some amendments of the law regulating the conventional insurance sector.

Islamic finance is called participative finance in the Moroccan legislation.

The Moroccan insurance sector is one of the strongest in Africa with revenues that reached 28.4 billion Moroccan dirham ($2.91 billion) in 2014, data of Moroccan federation of insurance and reinsurance Companies (FMSAR) showed.

The market is growing by around six per cent annually.

Major Moroccan banks and insurance companies have been preparing to open separate Islamic subsidiaries since the legislative process began. Foreign lenders have been also testing the waters.

Banks from Kuwait, Bahrain and the UAE have expressed interest in entering the market when the bill becomes law.-Reuters