Borrowing money to make money

SARA1Malaysia, or Skim Amanah Rakyat 1Malaysia, was launched and open for public on 30th January 2012. There wasn’t very much news about this previously (or maybe I just haven’t been reading the right papers), so I only found out about it through my friend’s sister who happens to be in the banking industry.

We were told that under SARA1Malaysia, RM5,000 would be put into investment under Amanah Saham for 5 years. Naturally, I thought it was an investment plan. Only after I checked the website of one of the banks involved did I find out that it is actually a loan scheme.

The sister later told us that, yes, it is a loan scheme, but one that is definitely worth it. She said she had called the hotline, and was told that the loan of RM5,000 would come from the bank. The government would absorb whatever interest the bank charges. Pretty sweet.

But how about the repayment? I asked. I read on the website that we have to repay RM84 every month for 59 months, and RM44 on the 60th month. The sister told me another version, one that she claims is what the person behind the hotline told her: the RM5,000 that is used to invest will bring about RM134 in profits every month, from which RM84 would be deducted automatically towards loan repayment, while RM50 would be deposited into our accounts.

If that story were to be true, that would mean that at the end of 5 years, successful applicants of SARA1Malaysia would be RM8,000 richer, without having had to produce a single sen.

You have to admit, while it sounds too good to be true, it’s enough to whip up your curiosity.

My friend, having heard this attractive story, decided to try and apply for this on behalf of her mother. So off to the bank we went.

The first indication that not all was as sweet-smelling as it seems was the fact that the bank was not full to the brim with people lining up to apply. If SARA1Malaysia was indeed what the sister had made it out to be, surely there would be plenty of people fighting each other to apply before the 100,000 quota was up.

Upon filling up the form and getting the necessary documents signed, we were told to enter the financial consultant’s room. It was in this room that we found out what SARA1Malaysia was all about.

Firstly, my friend’s mother, a homemaker, was not eligible to apply, simply because SARA1Malaysia is a loan scheme. The applicant has to have a monthly salary of between RM500-RM3,000 in order to qualify. This range applies for ‘gross household salary’, meaning that it’s husband and wife’s monthly salaries combined, or singles with “tanggungan”, meaning single parents. If you do not ‘earn’ anything (in my friend’s case, her mother is a homemaker, while her father is a retiree), you are automatically not eligible.

Secondly, the story we heard from the sister has been confirmed as false by the lady behind the desk. The monthly repayment of RM84 is borne by the applicant, and what’s more, we were told that the incentive of RM50 (to be debited into our Amanah Saham account) would only be given if we made the repayment on time. Meaning, if we missed the repayment in March, we would not get the RM50 incentive for the month of March.

We left the bank feeling a little ripped off. But then thinking about it now, this scheme really isn’t a very good one. It’s almost like the government is endorsing the concept of borrowing money to ‘make money’. How very unhealthy.

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