The new measure would allow contributors who need cash to use their savings in EPF Account 2 as collateral for personal loans from banks. — Bernama photo
KUCHING (March 10): The Sarawak Bank Employees’ Union (SBEU) has termed the government’s proposal to allow Employees Provident Fund (EPF) savings to be used as collateral for loans a “bad idea”.
SBEU chief executive officer Andrew Lo said such a proposal is “ill conceived”.
“Under the EPF Act, contributors’ savings are protected from bankruptcy proceedings so what happens if the borrowers default on their loans?
“Would banks want to give us a loan on such collateral?” he queried in a statement today.
Lo noted that the proposal was meant for those desperate for loans, but pointed out that there would be a high risk of them defaulting.
He said further that banks would charge a higher interest rate than EPF dividends.
In this way, he feared that EPF contributors would further see their overall financial position worsen.
“It also will increase the level of indebtedness which has reached an alarming level. Already a significant portion of workers’ income are for payment of housing, vehicle, and consumer loans,” Lo added.
Yesterday, Prime Minister Datuk Seri Anwar Ibrahim told the Dewan Rakyat Putrajaya will introduce a new policy where those who are in dire financial straits would be able to use EPF savings as collateral for bank loans.
A subsequent statement said contributors who need cash would be allowed to use their savings in EPF Account 2 as collateral to take up personal loans from banks.