Previously, Prime Minister Anwar Ibrahim proposed for retirement savings to be used as collateral for loans.

In a statement, the finance ministry said the government was finalising the initiative to allow EPF members to use the savings in their Account 2 to support loan applications from banks.

“This initiative will not burden the people because the interest rates (conventional) and profit rates (Islamic) imposed by the banks involved in this initiative are expected to be around 4% to 5%.”

It said these rates were far lower than market rates for loans which are around 8% to 15%.

The ministry also said the initiative does not violate Section 51 of the EPF Act 1998 as the savings in Account 2 could only be used to support loan applications.

“EPF will provide details of the initiative in the near future.”

Previously, Anwar proposed using EPF savings as collateral for those seeking emergency loans, following repeated calls from the opposition and other groups to allow further withdrawals.

The proposal was criticised by the Malaysian Trades Union Congress and the Sarawak Bank Employees’ Union.