September 21: The contribution-based Social Security Fund has started investing in various sectors with the policy arrangement regarding investment. After the issuance of the Social Security Fund Investment Procedures, the SSF has invested in fixed deposits, shares, debentures, treasury bills, capital market mutual funds, etc in line with the procedures.
The SSF informed that it has invested Rs 74.55 billion in various sectors so far. According to the data provided by the SSF to New Business Age, it has invested Rs 58.62 billion in the fixed deposit accounts of various banks as of August 17. The fund earns 9.69 percent interest from the amount kept in the term deposit accounts. Banks can invest that amount according to their preference. SSF officials say this will help reduce the lack of liquidity in the market.
Similarly, the fund has also invested in debentures. The fund has invested Rs 3.2 billion in debentures at an annual interest rate of 8.97 percent. The fund has invested Rs 260 million in mutual funds.
The fund has also invested in treasury bills, government bonds issued by the central bank. The SSF has invested Rs 9.21 billion in the treasury bills. Treasury bills are short-term government bonds used by Nepal Rastra Bank to raise domestic debt with a duration of 1 year or less than 1 year. Treasury Bills are of 4 types on the basis of duration with maturity period of 28 days, 91 days, 182 days and 364 days. The SSF informed that the amount has been invested treasury bills at an interest rate of 9.62 percent.
The fund has also invested in development bonds. According to the data provided by the SSF, it has invested more than Rs 1.98 billion in development bonds with an interest rate of 8.97 percent. Development bond is a government bond used to raise internal debt for medium and long terms with maturity period of more than two years.
Currently, the development bonds issued by Nepal Rastra Bank are for a period of 3 to 15 years. The fund is investing in those development bonds.
The fund has also started giving loans to contributors. As of August 31, the fund has lent more than Rs 1.44 billion to the contributors.
The loan is given under various headings such as the Contributor Fund, the Contributor Special Fund, the Contributor House Fund for Housing and Construction, the Contributor Educational Fund to support human capital, and the Contributor Social Work Fund to provide facilities for the work of the workers, based on the contribution amount.
According to the SSF, the contributors can get a housing loan equal to Rs 7.5 million or 15 years of salary, whichever is less, to build and buy a house, buy a unit in a joint housing or to add or repair a floor to the house they own.
There is a provision in the procedure that the contributor can receive up to Rs 3.5 million for higher education studies in the country or abroad for the contributor himself or his spouse, sons and daughters.
The contributors must have continuously contributed to the fund for at least 3 years to avail the facilities.
Vivek Panthi, the spokesperson of the fund, said that they have moved forward in the direction of obtaining high returns by investing the collected funds in various sectors through investment diversification. Targeting private sector workers, the then KP Sharma Oli-led government had formally launched the contribution-based social security fund on November 27, 2018. The fund starting collecting contributions from the formal sector workers from July 17, 2019.
The goal of the fund is to cover all sectors by making the workers and employees of the formal and informal sectors voluntarily join the state-sponsored scheme for social security. As of August 17, a total of 445,000 formal sector workers have joined the fund. More than 18,200 employers have been registered so far
Foreign workers are also joining the fund. The data shows that 336,000 foreign workers have joined the SSF.
Adding the formal, informal, self-employed, and those in foreign employment, the number of contributors to the fund has reached 781,000. Most of the employees of banks and financial institutions have not joined the fund. The employees of the bank have been taking a stand not to join the fund saying that the facilities they are receiving will decrease. They have even filed a case against the fund in the Supreme Court. The Supreme Court is yet to deliver its verdict. Due to the ongoing court cases, the fund has not advised banks and financial institutions to join the social security fund for the time being.