Bad Idea Union Says On Epf Savings As Loan Collateral Proposal

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The Sarawak Bank Employees' Union has dubbed the proposal by the government to allow Employees Provident Fund (EPF) savings to be used as collateral for emergency loans as a “bad idea”.
"Under the EPF Act, contributors' savings are protected from bankruptcy proceedings, so what happens if the borrowers defaulted on their loans? Would banks want to give us a loan on such collateral?
"Given that the scheme is for those desperate for loans, there would be a high risk of them defaulting," the union's chief executive Andrew Lo said in a statement today.
He was responding to the remark by Prime Minister Anwar Ibrahim yesterday that the facility will apply to contributors who have enough savings in their EPF accounts.
"My principle is that the money in EPF is meant for retirement savings. During Covid-19, we gave flexibility (for the people to make withdrawals). But now, other countries that offered the same flexibility have also stopped this.
"Instead, I propose another method to assist those desperately in need of cash.
“I will ensure that EPF will provide space to allow contributors with enough savings who are in dire straits to borrow from the bank, with their savings used as collateral. This is the best,” Anwar, who is also finance minister, said during his winding-up speech on the 2023 Supply Bill in Dewan Rakyat yesterday.
Prime Minister Anwar IbrahimElaborating, Lo said banks will charge a higher interest rate than EPF dividends, and this will cause the contributors to end up in an even worse financial position.
"It also will increase the level of indebtedness, which has reached an alarming level.
"Already a significant portion of workers' income is for payment of housing, vehicle, and consumer loans," said Lo. - Mkini

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