KUALA LUMPUR: The Employees Provident Fund (EPF) clarified that the proposed sale of public housing units to eligible participants by the Federal Territories Ministry will not involve the EPF providing loans to individuals.
Accordingly, interested participants should apply directly to the ministry and not to the EPF, it said in a statement Wednesday.
The EPF is currently in discussion with a special purpose vehicle of the Federal Territories Foundation (SPV FT Foundation) to provide the loan, subject to certain terms.
Essentially, the terms entail an initial facility of RM300 million with further loans to be granted at the discretion of the EPF Investment Panel subject to the satisfactory performance of the account by SPV FT Foundation.
This will be reviewed 12 months from the date of the last draw down of the RM300 million, EPF said.
“The EPF would like to assure its members that all loans provided by the EPF to the Malaysian government or its agencies are made on commercial terms and with appropriate security to protect the interests of our members,” said deputy chief executive officer and head of investment, Datuk Shahril Ridza Ridzuan in response to queries received from the public regarding the said loan.
In this case, SPV FT Foundation will enter into a lease arrangement (Ijarah scheme) with individual participants.
The ownership of the houses will remain with SPV FT Foundation until the lease arrangement under the Ijarah scheme is fully settled by individual participants.
The loan to SPV FT Foundation will be well secured as all housing units will be charged or assigned by the foundation to the EPF with security cover of at least twice the loan amount.
In addition, there will be a cash retention of 25 per cent of the disbursed EPF loan to SPV FT Foundation to be set aside in a liquidity reserve account assigned to the EPF, together with the assignment of all cash flows.
“The terms of the loan agreement are within the risk appetite of the EPF as it is secured against assets and cash flow with a suitable guarantee on repayment of the loan made.
The EPF has also requested that SPV FT Foundation engage a suitable financial institution to manage the credit administration of this scheme to ensure good conduct of the individual accounts.
Shahril said under the proposed terms, Kuala Lumpur City Hall will buy back the houses to secure the cash flow required for the repayment of the loan in the event of non-payment.
“Based on the terms and the security arrangements that we have put forth, the EPF is well protected and the annual 5.5 per cent profit rate imposed on the loan is fair,” he said.
Sharil said the EPF was always mindful of members’ concerns and would like to reiterate that their retirement savings are invested prudently within a framework of good governance and adopting a conservative risk-return profile. – Bernama