PRIME Minister Datuk Seri Anwar Ibrahim defended the move to allow members of the Employees’ Provident Fund (EPF) to use their contributions as collateral for personal loans from banks, saying it was not in conflict with the 1991 EPF Act.He said the matter had been discussed and refined with the EPF before the method was announced by him in the Dewan Rakyat on Thursday (March 9), an announcement that received some support but also a lot of criticism.The proposal is being criticised by some who believe it contradicts the concept of saving for retirement, as it could potentially allow banks to seize the individuals’ EPF accounts in the event they fail to repay the loans.The EPF proposal has also received criticism from some who do not wish to take out bank loans and instead opt to withdraw their EPF savings to avoid further involvement with the banking system.They argue that the proposal would compel them to accept bank loans, which they are not willing to do.Nevertheless, Anwar explained that the permission for contributors to use EPF savings as bank collateral is for those who have a large contribution but are facing difficulties.“We don’t allow people to withdraw EPF contributions anymore because this is not the time of COVID-19 anymore, they can work, but there are some urgent cases that need to be reported to us.”For example, if the person has money but can’t pay for the children’s education fees abroad and we don’t release the EPF, these users can seek a bank loan using the EPF account as collateral, Anwar said after officiating the World Water Day 2023 at the Indera Mulia Stadium today.However, a bank workers’ union has also criticised the proposed scheme.The Sarawak Bank Employees’ Union said the government’s proposal was “ill-conceived”, pointing out that contributors’ savings were safeguarded from bankruptcy proceedings under the EPF Act.“So what happens if the borrowers default on their loans? Would banks agree to give loans on such collateral?” the union’s CEO Andrew Lo said in a statement.
“Secondly, banks are going to charge a higher interest rate than EPF dividends, so contributors will see their overall financial position worsen further.” — March 11, 2023
