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High Pressure of Personal Guarantees

[via Joi Ito] As Joi pointed out, an article in The Japan Times reported praticing of personal guarantees could be a significant cause for high suicide rate in Japan. And there are 30,000 suicide cases a year in Japan. I was shocked! 30,000? There may be some tend to suicide again after being saved from suicide, but 30K is still a very high figure.

How about Malaysia? According to a Google Answer: Prevalence of Depression in Malaysia and this “speech” given by Chua Jui Meng, the suicide rate in Malaysia is about average 3 per 100,000 population. Let said Malaysia has estimated about 22,662,365 population, then it would be average 680.

Back to the personal guarantees, it goes like: Bank giving loan with personal guarantor —> thing goes bad —> the guarantor can’t paid —> life destroyed, friends/relatives left, everything changed, depressed —> people commit suicide. Most of these cases are bank taking personal guarantees for corporate loan from the businessman or his/her family. Is it also a common pratice in Malaysia? I don’t really get it. How a bank assess individual credit? By bank account balance? By reputation (celebrity)? Like our gold medal bowler Shalin’s case? There are lot of small to medium companies in Malaysia. And some of them do get bank loan by personal guarantees, especially when bank manager want to hit their target or when you are a good friend of the manager.

We’ve seen a few cases happened on Sports celebrities, their personal guarantees brought them bankruptcy. Is this a good pratice? Should bank give corporate loan by person guarantees?