LETTER | Refinancing: An alternative to EPF withdrawal

LETTER | Many from the B40, who were expecting an announcement concerning another round of withdrawals from the Employees Provident Fund (EPF), got disappointed.

The lacklustre Budget 2023 totally ignored the plight of this group's demand.

There have been incessant calls supported by party leaders for another round of EPF withdrawals to help the people temporarily tide over their financial hardship brought about by the rise in the cost of living, Covid-19, inflation, unemployment and the unfavourable ringgit exchange, which cumulatively have caused misery to a substantial number of working people.

The government is not in favour of allowing another round of withdrawal fearing the long-term implications of such a short-sighted move. The government has said that it will consider other ways apart from the EPF withdrawals.

However, there was no solution coming from Budget 2023 that was tabled by Prime Minister Anwar Ibrahim. Other than the usual assistance schemes for the B40 and some subsidies, there is nothing for this group who are clamouring for an EPF withdrawal.

The government is also hard-pressed to find a solution.

Possibly, one of the better ways is for the government to facilitate new regulations to refinance properties such as houses, land, cars or other valuables such as shares.

Most of the B40 own some property which they can re-finance. The government needs to look into this and ease the process of refinancing as the present procedures are tedious and stringent due to the banks' rigid terms and conditions.

The government need to relook at the procedures so that borrowers can refinance their property with ease for a small loan. There will be some complications but the government can iron out the problems.

The borrowers should get their loans at lower interest rates and this can be done only through a subsidy scheme. How about using the EPF amount as collateral for a loan from a bank?

I do not know whether this is possible or not. If this is feasible, then it will spare an EPF withdrawal. The loan can be repaid monthly.

The bank gets valuable collateral for the loan. However, the government has to ensure that the interest rate is low and legal expenses minimal and this can be done only by way of assistance from the government.

If the interest rates are the same as market rates and legal fees remain high, there will be few takers.

Temporary relief for those in need

Many of those who opt for this refinancing are desperate due to their financial difficulties. If they could re-finance their property such as land, houses, cars, lorries and others as collateral - they may not need immediate help by withdrawing from their EPF savings.

This concept of refinancing to help the people temporarily needs the involvement and commitment of the government as interest rates need to be kept low and legal expenses should be minimal, and both need to be subsidised by the government.

In my opinion, the ceiling for refinancing loans should be at RM20,000 or any other reasonable amount to ensure that the debt is not too big to be a future burden and the repayment period should be less than five years.

This method could be a temporary alternative to the EPF withdrawals sought by those in need.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.