EPF: Minimise interest charges if second account used as collateral

11 Mar 2023 12:59pm
Sinar Harian's report on Friday. (Smaller image, Faisol)
Sinar Harian's report on Friday. (Smaller image, Faisol)

SHAH ALAM - An economist has suggested the government engage the 'Qardhul Hasan' concept towards the proposal for Employees Provident Fund (EPF) second account being utilised as collateral for personal bank loans to avoid high interest charges for contributors.

Universiti Sains Islam Malaysia (Usim) Islamic Banking and Finance Senior Lecturer Dr Mohd Faisol Ibrahim said under the Qadhrul Hasan concept, banks would charge contributors borrowing RM10,000, one per cent of the total amount in interest.

“This is an important matter as the EPF savings guarantee will cause an increase in the debt service ratio (DSR) providing a negative perception towards other banking institutions if it is not implemented.

“This will complicate contributors in making important loans or financing as the collateral involves their future needs,” he said when contacted by Sinar on Friday.

Prime Minister Datuk Seri Anwar Ibrahim on Thursday said the loan would be given to those in need if it was implemented.

He explained it was the best measure as many countries that were providing flexibilities such as withdrawal of retirement funds are now in the process of stopping or cancelling such programmes.

Faisol added the collateral could provide a positive effect towards ensuring the second EPF Account is properly utilised.

“For example contributors could use it to purchase assets for a food stall or for additional stocks for online business. Many Malaysians are currently doing part time work to support their livelihoods.

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“If it was used to sustain their livelihood it would be an added burden as banks would charge interests in their loans,” he said.

He stated contributors must be smart in financial planning if they receive the collateral by ensuring some is saved and invested.

“If the collateral received is RM15,000 contributors must split it into three parts that is 20 per cent for savings, 30 per cent (investment) and 50 per cent for expenditures,” he stated.