Opinion: Anwar’s plan to use EPF savings to get loans

By P Gunasegaram. Copyright March 2023

As prime minister, Anwar Ibrahim needs to be much more circumspect and reflective before announcing schemes which needlessly raise peoples’ hope for more spending money to flow into their pockets.

Anwar said that the Employees Provident Fund (EPF) savings will be allowed to be used as security for personal loans. What? Before I explain fully why this may be the most foolish of the EPF schemes to date if it is somehow implemented, some background will help us better understand the issue.

It looks like politicians from almost all sides want to give money to the people so that they can get their support for elections - the impending ones are the six state elections. In fact, Anwar and Pakatan Harapan, to be on the right side of voters, supported the move to withdraw money from the EPF previously. But, as we shall see, voters are smarter than that.

If they had money in the treasury’s coffers, the government could raid that to give some free cash to people and buy their votes, a dangerous, and even futile effort. Dangerous because in our current state, it will just increase the debt level too high. Futile because they could still lose the elections anyway.

If they have no treasury money to give, the “brilliant” solution is to give money from their EPF instead. That won’t endanger the state but it would endanger the livelihoods of millions of EPF members and their dependents 10, 20, 30 and 40 years from now with much reduced money to spend in their old age and to take care of their dependents. Who cares - staying in power is more important, right?

Even that won’t buy the loyalty of voters as the last general elections showed. A huge RM145 billion was allowed to be withdrawn by over eight million EPF members by the two backdoor governments headed by Muhyiddin Yassin and Ismail Sabri Yaakob. By comparison, the total unemployed as a result of Covid-19 is probably less than 200,000 2.5% of the 8 million who withdrew their EPF money, an overkill of over 40 times!

That indicated that the money was not needed by most people but allowed to be withdrawn anyway. Despite this “reward” from their own savings, the voters gave a hefty kick in the rear to Umno, which continued this hare-brained scheme to buy voters.

Why? Because voters could see through their efforts. While people in droves succumbed  to the temptation of money in their hands now (that is why you need EPF to save people from their own imprudent ways), they realised that they were only getting their own money back. 

They knew that the government was endangering their future but money is a strong temptor/temptress as we all know very well - look at the hordes of politicians who have succumbed and how they live way above what an income as an MP and minister can sustain. 

Voters are much smarter these days. They took the money and voted against Umno - Umno’s worst ever performance - a mere 30 seats. That’s something this new unity government should think seriously about. Don’t, like Umno, underestimate the Malaysian voter.

Now, let’s go on to Anwar’s ludicrous scheme.  He said the government will allow EPF members, who are in “dire financial” states, to use their retirement funds as collateral for emergency loans, without the need to withdraw their savings.

First, who decides they are in financial difficulty? The EPF obviously. They don’t have the capability and capacity to do this. If people meet criteria that they set, such as the amount of withdrawal funds, most poor who really need the funds simply won’t qualify. 

According to the EPF data quoted in the press, 51.5 per cent or a total of 6.67 million of its members under the age of 55 had savings below the RM10,000 level as of last year. About 40,000 or less than 0.3 %  of members have more than RM1 million. Surely this scheme will benefit only those who are well off and are not likely to require help. Why even bother!

Next, how much will banks charge for these personal loans? Let’s say it's 7% - it may be higher but not very likely to be much lower. That means that the loan will have a higher interest rate than EPF’s (the last declared dividend was 5.3%), which means dwindling wealth over the life of the loan. 

Finally, if the person is so badly off, where is he going to get money to repay the loan? How is the bank going to foreclose on the loan? Pull out the EPF money from EPF before it is mature? Or will it let the loan balloon to whatever amount at the end of its tenure and take it off the EPF amount due with penalty interest and all?

If that is the case, the person who takes the loan may not only have anything in his EPF account at maturity, but on top of that owe the bank money! Whichever you look at it, you can see how ridiculous the scheme is and how needlessly complicated it can become.

Such absurd schemes arise out of corrupt and dishonourable intentions or out of political desperation. Is Anwar so desperate that he has to find some means of paying money through the use of EPF money, one way or another? 

Does he really feel this will appease the voters and get them to vote for Harapan in droves? Not likely. Even if they somehow did, it is based on a false premise since it won’t help the EPF member but practically could destroy all that he has in the EPF. That’s wrong and that should be enough to stop this hare-brained scheme once and for all.

Instead of clutching at straws for support, better that Anwar focuses his efforts on solving real problems. If you want to lift people out of poverty, give everyone a good education and appropriate training to prepare them for more productive jobs.

This will give them much, much higher income then they are earning now. That will take care of quality of life now and in the future. If people can see that he is focused on that and is taking meaningful steps in that direction the votes and support for the unity government will flow in. 

That will ensure the longevity of the government more than any other things he can do and perhaps even ensure that the coalition will have a life beyond five years.

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