‘Putting EPF savings as collateral a doable move, if paired with better mechanisms from banks’

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Datuk Sim Kiang Chiok

KUCHING (March 13): The federal government’s proposal of allowing the contributors to use their savings in the Employees Provident Fund (EPF) as collateral for bank loans is doable, provided that the move is paired with better mechanism from the banks, says Sarawak United People’s Party (SUPP) Stakan branch chairman Dato Sim Kiang Chiok.

He understood that the proposal meant to provide a more proper option in assisting contributors who were in desperate need of cash.

In this respect, however, he also pointed out the need to lower bank interest charges as well as extending the tenure of the loan.

According to him, providing such mechanisms is necessary in order to encourage borrowers to seek proper assistance in solving their financial problems.

“In my personal opinion, this proposed scheme of using EPF savings under Account II as collateral for bank loans is a good option for those in need of cash.

“The interest charge on this EPF bank loan could be lower, and the loan tenure should be given in longer term as the loan is secured by their (savings in) EPF Account II, being made a collateral.

“It is good that this option is open to the contributors as this would save a lot of them from borrowing from other improper lenders, incurring higher interest costs and having to agree to unfair terms,” he said in a statement yesterday.

Sim stressed that providing proper mechanisms and guidelines were vital in ensuring that the borrowers would not be at risk of defaulting.

Nonetheless, he also called for the federal government to come out with specific guidelines for the targeted groups of borrowers.

In his winding-up speech on the 2023 Supply Bill, Prime Minister Datuk Seri Anwar Ibrahim had spoken about the federal government allowing a special collateral agreement to assist EPF contributors through bank loans.

He said that the collateral agreement would be more suited to assist the contributors who were in desperate need of funds without having to withdraw their savings.