KUALA LUMPUR, April 9 — The move to let contributors use their Employees Provident Fund (EPF) savings as loan collaterals could lead to various problems that include saddling borrowers with high interest payments, former second finance minister Datuk Seri Johari Abdul Ghani said.
Johari, the Titiwangsa MP from Umno, joins a growing chorus of critics warning the Anwar administration about the implications that may arise from letting contributors use their retirement funds to cope with inflationary pressure.
“So, if you take a loan of RM70,000 and pay interest, say 5 per cent a year, that works out to RM3,500. Across 10 years, that’s RM35,000. Whereas EPF cannot guarantee you a return of 5 per cent on your balance,” he told news portal Free Malaysia Today.
“The net amount from a borrowing of RM70,000 after deducting interest payments is RM35,000. In such a case, it would make more sense for a contributor to simply withdraw RM35,000 directly from his Account 2. He wouldn’t have to pay a sen in interest.”
Eligible EPF contributors can now use their retirement savings in Account 2 as collateral for personal loans from selected private banks, a move Prime Minister Datuk Seri Anwar Ibrahim announced in March as part of the government’s short-term solutions to soaring living costs.
Lenders are guaranteed repayment when the borrower reaches the retirement age of 55 in the event the loan can’t be repaid within the stipulated tenure. Anwar said those using the facility can only get a loan of not more than RM50,000.
The move came amid calls to let a third large scale EPF savings withdrawal that are largely backed by ethnic Malays who are preparing to celebrate Aidilfitri.
Johari did not state if he supported the idea but noted that previous ad hoc withdrawals allowed during the Covid-19 crisis had forced the EPF to scramble for liquidity as they sought to let depositors take out billions in ringgit of savings.
Banks would also need to do its own credit score and prepare contracts to support the loan facility, which the Umno MP suggested could add to cost.
He said it would be better for a direct withdrawal instead so loan takers can avoid paying interest.
