THE Government should explore the option of allowing entrepreneurs to use their Central Provident Fund (CPF) monies to invest in their businesses.
Similar to investment in listed equities, an investment quota of 35 per cent of investable CPF savings could be applied.
This simple policy tweak could provide the necessary start-up financing or working capital that entrepreneurs require.
CPF monies could be structured as a loan whereby the entrepreneur "borrows" from his CPF savings. This is a better alternative to borrowing from banks, where there are often high effective interest rates and strict credit criteria.
The credit risk could be mitigated by requiring the entrepreneur to submit a business plan for approval before the CPF monies are released. Upon approval, the CPF monies could be drawn down in phases, contingent on profitability milestones stated in the business plan. This will protect CPF monies and enhance the potential return for CPF members.
In recent years, the Government has been encouraging citizens to be entrepreneurs. To give this policy a further push, the Government could incentivise entrepreneurs to use their CPF monies for their businesses and remove a significant barrier for start-ups. The net effect is more productive use of CPF monies compared to property and financial investments.
Singapore is blessed to have multinational corporations and government-linked companies as strong pillars of the economy. Having a third pillar of local businesses further diversifies our economy.
Releasing CPF monies is an important step in building this pillar of growth for the economy.