With the hope of attracting more people to enroll in the contribution-based Social Security Scheme, the government has rolled out some schemes under which contributors can borrow money from its funds.

The Cabinet meeting last week approved the Social Security Investment Working Procedures, 2020, paving the way for the Social Security Fund to provide loans to contributors.

Bibek Panthi, spokesperson for the Social Security Fund Secretariat, which manages the fund, said the new changes were introduced to attract more contributors as many people have been reluctant to join the scheme.

“The general public had been dissatisfied with the provision that they can’t withdraw their money when they needed it until they turned 60 years of age,” Panthi told the Post. “Now, with the new changes, they can withdraw the money whenever they need it.”

As per the new changes, various loans and lending schemes will be available for contributors under the contribution-based Social Security Scheme, which was rolled out for formal private sector workers in November 2018.

According to the new working procedures, a contributor will be able to access three types of individual loan—educational, housing and social functions. Under the loan plans, a contributor can access upto Rs10 million under all the loan headings whereas he/she can get an educational loan of upto Rs3.5million, housing loan of upto Rs7.5 million and social functions loan of Rs500,000 for completing rituals such as wedding after presenting collateral.

“For taking loans they will have to keep the security deposit, and the interest rate will be nominal,” said Panthi. “Contributors can also borrow from the amount they have deposited to the fund.”

Both employers and workers are required to contribute to the Social Security Fund every month. An amount equivalent to 31 percent of a worker’s basic salary—11 percent deducted from the worker’s monthly salary and 20 percent employer’s contribution— is deposited to the fund.

Workers are offered financial security under four categories of support—medical treatment, health protection and maternity plan; accidents and disability plan; dependent family plan; and old-age security plan.

Of the total monthly contribution, 1 percent goes to medical treatment, health protection, and maternity scheme; 1.40 percent to accidents and disability plans; 0.27 percent to the dependent family plan; and 28.33 percent to the pension or old-age security scheme.

The contributor can borrow from the money deposited under the old-age security scheme which provides them with gratuity and an old-age pension if the worker has contributed for 15 years and attained 60 years of age.

“After three years of regular contribution, workers will be able to take loans and also borrow as per their contribution,” said Panthi.

Although the Cabinet has given its nod to allowing the Secretariat to issue loans from the fund, it will take some time for the provision to be implemented.

According to Panthi, the existing Social Security Operational Guidelines will be amended before credit can be provided to contributors.

“New amendments to the directive will fix mechanisms like interest rates for loans, deposit securities, duration and amount to be provided,” said Panthi. “The secretariat has so far drafted four guidelines for setting up mechanisms for credit facilities.”

The much-talked-about social security scheme, introduced by the government amidst fanfare, has so far failed to take off. With its two years of arrival, it has largely failed to attract employers and workers. In the last two years, a total of 12,935 employers and 180,531 workers have registered with the scheme and contributed over Rs3.2 billion.

Officials expect the social security scheme to take off with the new plans.

“There were growing demands that the government provide loans and other forms of financial support from the money deposited by contributors,” said Kapil Mani Gyawali, executive director at the Secretariat. “We hope that with the new loan facilities, the enrollment rate will go up.”