In the economical growth of a country, the role of capital market is immense. It is a well organized market mechanism that inspires transfers of financial resources from mass investors to business, industry and agricultural segment belong to both private and private sector. This strengthens business activities, brings industrial revolution and boosts national economy. Unlike various stock market instruments, capital market products and services like public bonds, securities, mutual funds, public insurance policies offer assurance and typically mature after a specific period of time. The capital market is administered by major institutions mainly of public structure and helps enterprises to borrow and invest money for substantially longer period. Tom Colton says that capital market offers long term debt and financial assistance to corporate and public sector groups. Enterprises involved in capital market business provide consultancy, foreign exchange loans, underwriting apart from financial assistance.
The role of capital market
- Capital market is a huge source which effectively mobilizes inactive savings from the market or economy. With great financial instruments and products like bonds, mutual funds, fixed deposit schemes, the market inspires general mass to invest in protected channels with assured income. This solid monetary resource is than invested in productive business areas.
- One of the key benefits of capital market is that it helps productively in capital formation. Through proper mobilization of money resources from savings, these are funded in segments like public enterprises, agricultural sectors, heavy industries and big corporate sector. Thus, this fund is used for capital formation essential for business growth and economic development.
- Mainly managed by public enterprises, insurance companies and banking sector the market is much reliable investment area for common people. The market raises liquid cash and resources for long period of time. Mostly these investment products are launched with higher locking period but with attractive interest return rates and thus, encourage potential investors. Naturally, at the time of investing to public groups or agricultural sectors, the capital market can offer them long term investment proposals.
- Capital market is a major strength of national economy and throughout the world; it plays a vital role toward industrial development, national planning and community development. The availability of capital funds for longer period helps nation to invest in major scientific research and development, business infrastructural growth that generate employment opportunities.
- With a consistent infrastructure, capital market is capable to large-scale fund mobilization. This also requires proper allocation in the lawful manner to different authentic segments. Since the entire function of capital market is controlled and regulated by governmental bodies, public insurance companies, it ensures qualitative use of mobilized funds. It is, on the other hand, capital market ensures investors’ time based assured returns of their funds with committed interest rate that makes those investment instruments demanding to people.
Equipped with top notch officials, learned advisors and veteran workforce with deep knowledge in money market and great service infrastructure, institutes involved in Capital market offers varieties of services. As it include medium to long term loans, it also provides advisory services, export finance, foreign exchange, collateral services and others. In addition to all above benefits, Tom Colton thinks that best characteristic of capital market is its capability to continuous supply of funds since its market demand is consistent to both investors and borrowers.