31 May 2023
Press statement by MCA Deputy Treasurer-General Datuk IR Lawrence Low
Concerns Raised Over FSA2: Is it Really Helping People or Worsening Debt Burdens?

The EPF Account 2 Support Facility (FSA2) , implemented by the government for the past two months, is facing increasing issues and negative feedback from the public. Datuk IR Lawrence Low, MCA Treasurer Deputy, highlights concerns regarding the policy's details, suggesting that it has failed to effectively address economic challenges for the people and may even worsen their debt burden.
Currently, Malaysia Building Society Berhad (MBSB) Bank and Bank Simpanan Nasional (BSN) are the two banks participating in FSA2. Low finds it unreasonable for banks to require borrowers to purchase Group Credit Term Takaful insurance (GCTT). He questions the necessity of additional insurance when borrowers have already pledged their EPF as collateral, stating that it increases their financial burden and contradicts the objective of assisting EPF members in overcoming economic difficulties.
The primary aim of FSA2 was to provide EPF members with lower loan interest rates using their EPF as collateral, increasing their disposable income and borrowing capacity. Although the government stated interest rates range from 4% to 5% annually, they are not fixed throughout the loan period. They fluctuate based on the Overnight Policy Rate (OPR), with a maximum cap of 15% per year. After a recent central bank interest rate hike, FSA2's loan interest rate has risen to around 4.75%, potentially exacerbating the financial difficulties of struggling individuals and leading to a debt crisis.
Low emphasizes, "Many borrowers are already in dire straits, grappling with their financial situation. As they are unable to withstand the current economic difficulties and high inflation, it is crucial to alleviate their burden and support them through these challenging times."
The future remains uncertain regarding the possibility of the raising OPR again to combat inflation. Low raises concerns about hardworking borrowers who initially sought relief through this policy and whether they will end up facing higher borrowing costs, potentially exacerbating their setbacks.
To mitigate the risk of loan defaults and ensure the long-term sustainability of the EPF fund, Low proposes the following recommendations:
(1) Loan terms revision: The government should engage in discussions with participating banks to eliminate the mandatory requirement for borrowers to purchase GCTT. This adjustment would alleviate borrowers' burden and enable them to better utilize the facility to address their current economic challenges.
(2) Fixed loan interest rates: Ensure that the loan interest rates under the FSA2 program remain stable throughout the loan tenure, independent of OPR adjustments. This approach would allow borrowers to plan their repayments more effectively and reduce uncertainty arising from interest rate hikes.
(3) Comprehensive debt counselling: Establish dedicated institutions or expand existing ones to provide borrowers with transparent, comprehensive, and explicit debt counselling services.
Low emphasizes the crucial need to prioritize increasing people's income, reducing debt, and managing expenses, particularly during the current economic downturn and high inflation. The government must provide unwavering support to its citizens, enabling them to save diligently and prepare for future challenges.
-MCA Online-