The Ministry of Finance (MOF) has revealed that banks will charge a lower interest rate of 4% to 5% p.a. for loans that are supported by Employees Provident Fund (EPF) Akaun 2 savings, in comparison to the current rates of personal loans in the market. As such, the proposed facility will not be a drain on the people.

“This initiative will not burden the people as the interest rate (conventional) or profit rate (Islamic) that will be charged by the banking institutions involved in this initiative is expected to be between 4% to 5% per annum. This rate is significantly lower than the current market rate of personal financing from banking institutions charged at around 8% to 15%,” the MOF shared in a statement, adding that it is working on finalising the details of the facility.

Aside from that, the ministry also stressed that this EPF-based loan facility will not breach Section 51 of the EPF Act 1991 because the savings balance in Akaun 2 is only used as a support for loans through withdrawals at the age of retirement. In the meantime, the EPF members will still continue to receive dividends on the savings used as backup.

For context, one of the items included in Section 51 of the EPF Act 1991 states that members’ EPF fund cannot be assigned, transferred, attached, sequestered, or be levied upon for – or in respect of – any debt or claim whatsoever.

“This is in line with the EPF’s investment objective as a long-term retirement fund to hedge and increase the value of members’ savings through the declaration of a stable and sustainable dividend rate,” the MOF emphasised, adding that it will not consider allowing further EPF withdrawals for individuals who are still struggling financially from the impact of Covid-19. The ministry also noted that all countries that had previously allowed similar assistances during the pandemic have stopped doing so since 2021.

Meanwhile, Prime Minister Datuk Seri Anwar Ibrahim – who is also the Finance Minister – clarified that the government will utilise Islamic financing for the Akaun 2 loan support facility. This is in a bid to keep service costs at a minimum. However, EPF members (both Muslims or non-Muslims) who opt to borrow through conventional methods are also welcome to do so.

“For EPF, it has chosen to ask members to use the Islamic financing loan method with the lowest interest rate, which is of course lower than the market loan rate,” said Datuk Seri Anwar during a Parliament session.

Earlier this month, Datuk Seri Anwar had floated the idea of allowing EPF contributors to use their Akaun 2 savings as collateral for emergency loans from banks. It serves as a compromise, following persistent calls from various parties to allow yet another EPF withdrawal, despite having already rolled out four pandemic-related special withdrawals previously (i-Lestari, i-Sinar, i-Citra, and the RM10,000 special withdrawal facilities).

The prime minister also stressed that this latest facility should only be taken up by those who are truly struggling with their financial circumstances and are in desperate need of cash.

(Sources: New Straits Times, Malay Mail)

• TAGS:
• Akaun 2
• Datuk Seri Anwar Ibrahim
• Employees Provident Fund (EPF)
• EPF
• EPF Account 2 Support Facility
• EPF Akaun 2