Govt To Allow EPF Members To Use Account 2 Savings As Collateral For Loans
The Sarawak Bank Employees' Union, however, has criticised the government's plan as "ill-conceived", asking, "So what happens if the borrowers default on their loans?"
By Sadho Ram — 10 Mar 2023, 03:51 PM
The government will allow Employees Provident Fund (EPF) contributors to use their Account 2 savings as collateral for bank loans, Prime Minister Datuk Seri Anwar Ibrahim has announced
Anwar, who was winding up his speech on the 2023 Supply Bill in Dewan Rakyat yesterday, 9 March, said that the collateral agreement is more suited to assist contributors who are in "desperate" need.
According to him, under the scheme, EPF members will not have to withdraw their savings.
Anwar told Dewan Rakyat that he is "open to all criticism" made against him for not allowing another EPF withdrawal as he does not agree with a special withdrawal of the people's retirement savings.
"[But] I will ensure EPF allows contributors who have [the] money yet [are] facing financial difficulties to borrow from banks by using their EPF savings as collateral," added Anwar, who is also the Finance Minister.
Anwar claimed that the new scheme is a better option for those who are tied with their business debts, which can reach up to RM200,000
According to the Prime Minister, the scheme will allow flexibility for contributors from the informal sectors, including those who are self-employed and have inconsistent income, reported New Straits Times.
"In some cases, contributors are also tied as they have the money (in their account) but cannot withdraw it. Hence, that is why we are saying that is a collateral agreement, they don't have to withdraw from EPF but at the same time, their savings are made as collateral," Anwar was reported as saying by the English daily.
In a statement released subsequently, Anwar said that he has instructed EPF to "examine the best method to implement this measure" for contributors who need cash, reported the EdgeProp.
Anwar mingles with MPs after his speech in Dewan Rakyat yesterday, 9 March.
Image via New Straits TimesEPF has since said that the fund will carefully consider all relevant factors to ensure the scheme's smooth implementation
"EPF acknowledges [Anwar's] announcement regarding the use of the balance of contributions in Account 2 to support the application for a personal bank loan for those who need cash assistance. Further details regarding the implementation of this initiative will be announced by EPF at a later date," it said.
Anwar's proposal, however, is now facing criticism from the Sarawak Bank Employees' Union, which described it as "ill-conceived"
According to the union's chief operating officer (CEO) Andrew Lo, the proposal will lead to an increase in the already "alarming" level of indebtedness among Malaysians, reported Free Malaysia Today.
"So what happens if the borrowers default on their loans? Would banks agree to give loans on such collateral? Secondly, banks are going to charge a higher interest rate than EPF dividends, so contributors will see their overall financial position worsen further," he said while adding that many workers are already spending a significant portion of their income to repay housing, vehicle, and consumer loans.
