KUCHING, March 10 — A Sarawak union leader today said the federal government’s plan to allow savings from the Employees Provident Fund (EPF) to be used as collateral for bank loans was ill-conceived.
Sarawak Bank Employees Union (SBEU) CEO Andrew Lo said the proposal announced by Prime Minister Datuk Seri Anwar Ibrahim in Parliament yesterday will not help EPF contributors to solve their financial problems.
“Under the EPF Act, contributors’ savings are protected from bankruptcy proceedings, so what happens if the borrowers were to default on their loans?
“Would banks want to give us a loan on such a collateral?” Lo, who is also the Malaysian Trade Unions Congress (MTUC), Sarawak Division secretary, asked in a statement.
He said given that the scheme is for those desperate for loans, there would be a high risk of them defaulting.
Moreover, he said banks are going to charge a higher interest rate than EPF dividends.
“So contributors will further see their overall financial position worsen.
“It also will increase the level of indebtedness which has reached an alarming level,” Lo said, adding that there is already a significant portion of workers’ income for payment of housing, vehicle and consumer loans.
In his winding-up speech on the 2023 Supply Bill, the prime minister had said that the federal government would allow a special collateral agreement to assist EPF contributors through bank loans.
He stressed the collateral agreement was more suited to assist the contributors who were in desperate need of funds without having to withdraw their savings.
