Allow use of EPF contributions as bank collateral, says economist

 

Four tranches of EPF withdrawals have been allowed since 2020 following the Covid-19 pandemic. (Bernama pic)

PETALING JAYA: Employees Provident Fund (EPF) members should be allowed to use their contributions as collateral for bank loans, says an economist.

Shazali Abu Mansor of i-CATS University College, Kuching said banking institutions could accept EPF savings as collateral to give out loans to those facing financial difficulties such as debt.

He said this was one of the alternatives the government could consider in the face of renewed calls by NGOs for EPF contributors who were financially affected by the Covid-19 pandemic to be allowed to make another round of withdrawals.

“If the government can instruct the banks to help those with debt problems, it would be better because the strict regulations of some banks are making it difficult for the people,” Bernama quoted him as saying.

“The banks should know that the problem is caused by the Covid-19 pandemic.”

Shazali said the government, through Bank Negara Malaysia (BNM), should also prioritise the welfare of borrowers, and not solely protect the interests of banking institutions.

“Where the rules can be relaxed, they should be relaxed,” he said.

These included allowing customers who were blacklisted to restructure their loans or create a flexible repayment scheme based on their financial ability.

Adilah Azhari, a senior lecturer at Universiti Utara Malaysia’s School of Economic Studies, said EPF could reduce its contribution rate for several months to enable contributors in financial difficulties to have more disposable income.

“For example, for those with an accumulated contribution of less than RM10,000, it may be possible to reduce their contribution rate to as low as 4.5%, while the rate for those with more than RM10,000 could be set at 8%,” she said.

Meanwhile, an economic analyst at UniKL’s Business School, Aimi Zulhazmi Abdul Rashid, said if EPF withdrawals were to be allowed again, they should be credited to the members’ bank accounts to settle their outstanding debts or adjust their loan repayments.

“It can also be made through the Credit Counselling and Management Agency (AKPK), specifically to those with bank debt. If this can be done, it will give a new lease of life to those affected,” she said.

On Monday, Prime Minister Anwar Ibrahim said other options should be considered instead of further EPF withdrawals to help those affected by the pandemic.

He said that as most contributors have seen their savings dwindle, allowing more withdrawals will affect their ability to sustain themselves when they retire.

Four tranches of EPF withdrawals have been allowed since 2020. A withdrawal of up to RM10,000 was allowed last year, following the i-Lestari and i-Sinar schemes in 2020, and i-Citra in July 2021. - FMT