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Posted by Tanpa Nama | Posted on 9:20 PTG

Philosophy Politics Economics


Low-Cost Housing Loan: In Breach of EPF Act 1991

Posted: 04 Feb 2012 07:25 PM PST

Both the Prime Minister and the Minister of Federal Territories tried to justify the use of RM1.5 billion from Employee Provident Fund (EPF) to provide loans for social housing yesterday after being criticised for abusing workers' retirement funds for political purposes.

Datuk Seri Najib claimed that RM1.5 billion needed was "not substantial compared to EPF funds".  He further added that "the scheme does not undermine the interests of the EPF because the value of the housing units in the market is far higher than the purchase price... If a buyer is unable to or does not repay the loan, the unit can be sold for a higher price."

Raja Nong Chik also explained that "To the EPF, this is a secured business transaction, a secured loan, it is more secured than other corporate land property which is guaranteed by a government agency — the DBKL (Kuala Lumpur City Hall)."

Firstly the Prime Minister must be castigated for having the cheek to claim that the RM1.5 billion is an insignificant amount relative to the EPF fund size. Regardless of whether it is RM1.5 million or RM1.5 billion or even RM15 billion, the EPF funds must be managed stringently and not be subjected to abuse.  Similarly whether the amount is a RM100 or a RM1 million bribe, if its a crime, being the lesser amount provides absolutely no justification.

Secondly, if the low-cost properties are so collateral-worthy, that the market price is much higher than the purchase price, then why can't these loans be made via commercial banks and not through EPF social lending programmes? If DBKL is able to provide the guarantee, and the guarantee is even "better than normal corporate property", then surely, banks will be rushing to provide the loans and not shy away from them.

The EPF on its website says that it "aims to provide financial security for its members' retirement purposes. The fund is committed to preserving and growing the savings of its members in a prudent manner in accordance with best practices in investments and corporate conduct."

Therefore the EPF is not a lender of the last resort for the poor and neither is it a social welfare organisation.

Finally, the social housing loan scheme is in breach of the EPF Act 1991 which regulates the fund in terms of permissible investment activities.  Under Clause 26 the Act, the EPF may lend money to Federal and State governments. It can also provide loans to and subscribe to bonds of registered corporate bodies in the country.

It may even provide loans to members of the Fund "for the purpose of purchasing or building a house". The EPF housing loan to its members is based on a proportion of the worker's contribution to the Fund.

However, no where in the Act does it say it can provide loans to individuals to acquire low-cost apartments using the property as a collateral. Despite the "guarantee" from DBKL, the loans are being made out directly to the property owners who may or may not have contributed to EPF.

We fully support measures by the Government to assist the poor to own their own properties. However such measures cannot be at the expense of abusing Malaysian workers' retirement savings as specifically outlined in the EPF Act.

The Federal Government if need be, can borrow directly from EPF as it does normally, for its social welfare programmes.  The EPF should not however be directed to provide loans directly to the general public and put itself at risk of default by the individual borrowers.

Najib who is also the Finance Minister must stop the social housing loan scheme in its current form to not only ensure compliance with the EPF Act, but more importantly, ensure that the workers' hard-earned savings will not be jeopardised in the guise of politically motivated charity.

Letter: Schemes for poor shall not be at the expense of EPF contributors

Posted: 04 Feb 2012 07:22 AM PST

Dear YB Tony Pua,

Permit me to introduce myself as a retiree  from private sector who had been an EPF contributor. I thank you very much for bringing up the issue of EPF advancing monies for low cost houses in Willayah Persekutuan. As much as we support schemes for supporting the poor, as rightly pointed out by you and others, it shall not be at the expense of EPF contributors like us. I wish to bring to your kind attention few issues which I hope your team will examine for the benefit of contributors like us. As this has direct and long term implication for every EPF contributor, I humbly request you to vehemently protest and protect innocent contributors like us.

1. Who is the borrower in this case and who is the lender? Only the lender can foreclose a property and if EPF is not the lender what is the use of a collateral? If EPF is not the direct lender what locus standi does EPF  have for foreclosure? Is there loan agreement with EPF and the borrower ie individual borrower? How is EPF going to implement land code act in the event of defaults? Is EPF permitted to lend to individuals who are not even EPF members? Can EPF, in this case as a 3rd party, take any action against defaulters? ( There is no guarantee etc). What recourse does EPF have in the event the organisation behind this does not exist after a few years as these loans can be as long as 25 years?

2. What is EPF's collection arrangement? Who is the debt collector? May be City Hall  of Kuala Lumpur will undertake this function but then what firm arrangements have been made? To disburse funds by March means, probably all formalities are likely to be overlooked.

Hope your team of Ahli Parlimen will will stand behind citizens like us and wish you good luck in all your endeavors.

Yours sincerely,

V

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