Reconsider Proposal To Use EPF Funds For House Loans (The Star: 09-02-2012) - MOF
THE EMPLOYEES PROVIDENT FUND
With reference to the letter by Mr. Baljit Singh Gill published today, theEmployees Provident Fund (EPF) would like to clarify that the scheme relating to the proposed sale of public housing to eligible participants does not involve the EPF providing loans to individuals.
The EPF is presently in discussion with a special purpose vehicle of the Federal Territories Foundation (SPV FT Foundation) to provide a loan of which the terms are being finalised. Essentially the terms entail an initial facility of RM300 million with any further loans to be granted at the discretion of the EPF Investment Panel subject to the satisfactory performance of the conduct of the account by the SPV FT Foundation. This will be reviewed 12 months from the date of the last drawdown of the RM300 million.
The EPF would like to assure its members that all loans provided by the EPF to the Government of Malaysia or its agencies are made on commercial terms and with appropriate security to protect the interests of our members.
In this case, the SPV FT Foundation will enter into a lease arrangement (Ijarah scheme) with the individual participants. The ownership of the houses shall remain with the SPV FT Foundation until the lease arrangement under the Ijarah scheme has been fully settled by the individual participants. The loan to the SPV FT Foundation will be well secured as all housing units will be charged or assigned by the SPV FT Foundation to the EPF, with security cover of at least twice the loan amount.
In addition, there will be cash retention of 25 per cent of the disbursement of the EPF loan to the SPV FT Foundation to be set aside in a liquidity reserve account assigned to the EPF, together with the assignment of all cash flows.
The terms of the loan agreement are within the risk appetite of the EPF as it is secured against assets and cash flow with a suitable guarantee on repayment of the loan made. We understand that the SPV FT Foundation will only select participants with good rental payment track records.
The EPF has also requested that the SPV FT Foundation engage a suitable financial institution to manage the credit administration of this scheme to ensure good conduct of the individual accounts.
Under the proposed terms, DBKL will buy back the houses to secure the cash flow required for the repayment of the loan in the event of non-payment.
Based on the terms and the security arrangements that we have put forth, the EPF is well protected and the annual 5.5 per cent profit rate imposed on the loan is fair.
We thank Mr. Gill for his feedback and recognize his concern but we would like to reiterate that members’ retirement savings are prudently invested within a framework of good governance while adopting a conservative risk-return profile.
(NIK AFFENDI JAAFAR)
Employees Provident Fund
Date: 9 February 2012