KUCHING: A well-known businessman has addressed concerns regarding the possibility of the Employees Provident Fund (EPF) contributors losing their entire savings in the event of a loan default.
Datuk Sim Kiang Chiok told New Sarawak Tribune that it was not possible for contributors to lose all their savings in their EPF account in the event of a loan default, as the collateral was limited to a maximum of 30 per cent of the total EPF savings.
EPF Account 2 is a mandatory savings account for all its contributors in Malaysia. It accumulates 30 per cent of the contributors’ monthly salary and can be withdrawn at any time for repayment or deposit for housing and education fees for children, even before the contributor reaches the age of 55.
Sim also highlighted the potential benefits of this policy, particularly for those who did not require the savings for housing or education fees.
“The interest rate on an EPF bank loan could be lower, and the loan tenure could be extended as it is secured by EPF Account 2 as collateral,” he added.
He believed that this policy could save many contributors from borrowing from improper lenders who charged higher interest rates and unfair terms.
“This option could be a wise choice for contributors who need financial assistance, as it could provide them with an alternative to borrowing from lenders with unfair terms and higher interest rates,” said Sim.
Prime Minister Datuk Seri Anwar Ibrahim clarified recently that the proposal to allow the EPF contributors to use their savings as collateral for loans would not have required withdrawals from their savings. He reiterated that the policy was designed to assist individuals in dire need of financial assistance.
