KUALA LUMPUR: The Employees Provident Fund (EPF) has turned to the Ministry of Finance (MoF) directly after a government guarantee scheme provider rejects the plan to cover defaulted loans under the EPF Account 2 Support Facility programme, sources said.
According to the sources, a proposal was made that Syarikat Jaminan Pembiayaan Perniagaan Bhd (SJPP) be roped in to provide the necessary fund for the matter but was turned down by the Finance Minister Incorporated (MoF Inc)-owned firm.
"A due diligence was carried d out by SJPP for the matter including reviewing the terms and conditions of personal financing under MBSB Bank, which, at the time, was the only participating bank offering the facility."But the proposal did not materialise.
"This is especially because SJPP does not cater for personal financing. Its claim fund would not be able to accommodate additional non-performing loans (NPLs)," a source told NST Business.
Established in 2009, SJPP offers government guarantee schemes for small and medium enterprises to obtain financing from financial institutions. The firm is managed by Prokhas Sdn Bhd which is also owned by MoF Inc.
In a statement on April 3, the pension fund said that savings in EPF Account 2 can only be used to pay for personal financing through an advance application for a certain conditional withdrawal.
The condition is that the withdrawal payment will only be made to the banking institution when the member reaches the age of 50 to 55 as stipulated in the EPF Act 1991.
The retirement fund, however, did not elaborate on who will cover defaulted loans under the credit support facility before the borrower reaches the age of 50.
"The idea was to rope in a third party to repay the creditors first before it can be reimbursed by EPF using the member's Account 2 savings when the appropriate time comes," another source said.
EPF did not respond to an NST Business request for comment.
On April 7, EPF chief executive officer Datuk Seri Amir Hamzah Azizan told TV3 that some 4.1 million EPF members were eligible to apply for the Account 2 Support Facility. The maximum financing amount is fixed at RM50,000.
Back-of-envelope calculation shows that NPLs under the facility could hit a staggering RM410 million if a mere one per cent of the eligible members each borrow RM10,000 and default on their loans.
Following SJPP's rejection, it remains unclear who will emerge as a white knight to cover defaulted loans under the programme.
In an interview with TV3 last week, Amir Hamzah said that banks would carry out the neccessary debt recovery process at their own discretion in case of a loan default.
"In Malaysia, our banks are quite considerate. If anything happens they (borrowers) can discuss with their banks. Maybe they can extend the loan [repayment period] or even restructure the loan — all this is entirely within the banks' discretion," he said.
Meanwhile, the EPF announced that as at April 14, a total of 74,392 applications had been received under MBSB Bank's Ihsan-i Account 2 Support Facility, with 34,643 of them being eligible applications for a total amount of RM722 million.
The fund expects the number of FSA2 applications to increase further, particularly with the launch of Bank Simpanan Nasional's BSN MyRinggit Insan-i.
Amir Hamzah, in a statement last Saturday, clarified that the facility targets EPF members who have savings in Account 2 and have reasonable income to afford the personal financing and monthly repayments without compromising their retirement income adequacy and security.