A CIVIL society group and a union today slammed the government’s proposed scheme to allow Employees Provident Fund (EPF) contributors to use their Account 2 savings as collateral for personal bank loans.

They said the proposal is not well-thought out and will only lead to more financial issues for EPF members.

They said the EPF Act 1991 disallows contributors from using their EPF savings as collaterals for any third-party loans.

The Sarawak Bank Employees’ Union said the proposal is “ill-conceived”.

It said contributors’ savings are safeguarded from bankruptcy proceedings under the act.

“What happens if the borrowers default on their loans? Would banks agree to give loans on such collateral?” union chief executive Andrew Lo asked in a statement.

“Banks are going to charge a higher interest rate than EPF dividends, so contributors will see their overall financial position worsen further.”

Lo said the proposal will increase Malaysians’ debt.

In his Budget 2023 wind-up yesterday, Prime Minister and Finance Minister Anwar Ibrahim said the proposed scheme will only be for those in desperate need of funds and who are forced to apply for bank loans.

Anwar said he does not agree with allowing another round of special EPF withdrawals. In response, EPF said it is assessing the proposed scheme and will consider all relevant factors for it to be implemented smoothly.

Pertubuhan Gagasan Inovasi Rakyat Malaysia president Azmi Mohd Tahir said the proposal will only add to people’s burden.

He said his organisation received many complaints from people opposing the government’s proposal.

He said the EPF Act 1991 prohibits the use of EPF savings as collateral for bank loans.

He said the calls for fresh emergency EPF withdrawals is to help depositors sort out their existing loans.

He said the last thing EPF depositors want is more loans. – March 10, 2023.