I WAS half-asleep as the front-page headline of theSun stared back at me.
In disbelief I read that funds from the Employees Provident Fund (EPF) — RM1.5 billion to be exact — are to be channelled to a foundation to provide loans to Malaysians who are not able to get a housing loan from a commercial bank. Not only that. The loan would be at a lower interest rate than that offered by a bank. The report quoted Federal Territories and Well-Being Minister Datuk Raja Nong Chik Raja Zainal Abidin as saying that these loans would be provided to retirees and those without steady income.
Only a week earlier, I had dropped by an EPF office to get a statement. The friendly customer service representative who attended to me suggested that I may want to withdraw some of my EPF savings and invest it myself. At first I was confused. Why would she suggest I withdraw some of my savings? Now, it all clicked.
Some 48 hours after I read the report of the scheme the government plans to introduce as soon as March 1, I am still in shock.
How can the government take funds which you and I have put aside for our retirement and use it to fund home purchases of those without a steady income? I am all for helping those who are experiencing difficult times, but there has to be another way of doing so.
In case it has escaped the notice of Raja Nong Chik and other members of the cabinet, the objective of the EPF is to set aside funds for employees who do not have any pension scheme. On retirement, the amount the employee and employer have contributed during the employees’ working life is available with interest or dividends to be paid in a lump sum so that the employee has sufficient funds to fund his or her retirement.
The monies belong to the members of the EPF — not the government. The board of the EPF has a stewardship responsibility — to act in the best interests of its members.
I do not think this scheme is in the best interests of its members.
Sadly, there is very little protection afforded to us — its members — under our laws.
According to the EPF Act, its board of directors has no choice in this matter. Section 11 of the Act gives the minister power to give directions to the board. In other words, even though the funds do not belong to the government, the Act allows the government to decide how the funds which belong to the members of the EPF are invested.
Section 26 of the Act sets out the investment mandate of the fund. It specifically states the type of investments the EPF can make. There is one very broad statement which says that with the approval of the minister, the fund can invest in “any other form of investment”.
This means that from a legal perspective, it is within the government’s powers to implement the scheme which Raja Nong Chik has so gleefully announced.
Well, as a member of the EPF, I have a few questions which I would like answered.
If the fund is for those who are retired or do not have a steady income as reported, how is the borrower going to repay the loan?
Secondly, since these loans are to be offered at a lower interest rate than that offered by commercial banks, who is going to make up the difference in these rates so that the members of the EPF do not lose out?
Thirdly, who is going to fund the agency that is going to implement this scheme?
Does the EPF have to pay a fee to this agency to take on this task? After all, the amount of administration required to disburse RM1.5 billion will be significant. Does the EPF have to pay a fee for this scheme to be implemented?
Finally, how is it that such a scheme can be implemented so quickly? The scheme was announced at the end of January. Yet the minister claims that the first loans will be disbursed by March 1. Can all the checks and balances to ensure that the lender is protected be put in place within one month?
I understand that those of us who can afford it have a moral obligation to assist those less fortunate. But let’s come up with a scheme which does not involve taking from a fund that has invested carefully for its members because it is expedient to do so.
My research has indicated that there are no legal avenues available to us — members of the EPF — to object to this poorly-thought-out and ill-conceived scheme.
If the government is really concerned about the welfare of those in the low-income or no-income category, it should allocate a budget and be transparent about the cost of doing this. Then there would be full transparency to the public. At it is, by using the EPF, accountability is absent and the cost of this initiative is lost in the myriad of investments that the EPF makes for its members. Clearly there is no budget in the government’s annual operating plan for this initiative. Hence the use of the EPF.
So what do we do?
I could go back to that friendly customer service representative who attended to me at one of the EPF offices and follow her advice. At least someone at the EPF does have its members’ interests at heart.
Tony Pereira is a chartered accountant and CFO of a private venture fund