The Role Of Capital Markets In An Economy – Cytonn

By Soko Directory Team / Published January 11, 2021 | 11:23 am



Equities

The capital market’s main role is to link suppliers of capital for example pension schemes or SACCOs with users of the capital i.e. people who are mainly in the production of goods and services across sectors.

The capital markets, therefore, play a vital role in economic development as they promote growth in the real economy by enabling access to long-term financing for producers of goods and services, and entities tasked with infrastructure development like the government.

Promoting Savings and Investment Culture

Given that the Capital market offers a variety of financial instruments, it is important that the products offered are attractively priced and easily understood across the board.

Additionally, to promote the savings and investments culture in the economy, capital markets need to ensure that the products offered to meet the risk-return threshold and that the units are affordable to the larger public,

Linking Suppliers and Users of Capital

Though the link between agents with a monetary deficit and the ones with a monetary surplus can take place directly through direct financing, it can as well take place through the financial intermediaries in form of indirect financing.

This is a situation whereby operators facilitate the contact between the real economy and the financial market enabling optimum use of assets and resources in a monetary form that promotes economic growth.

READ: Metrotrans Sacco receives 45 new buses with financing from Co-op Bank

Facilitate Efficient and Effective Allocation of Resources

By offering a wide range of financial instruments with different risk profiles and returns, the capital markets support the efficient allocation of deficient financial resources in the financial market.

The competitive pricing of securities and a large variety of financial instruments with different risk and return features allow investors to juggle around their risk profiles and return appetite.

READ: Co-op Bank Awards Ksh 5million To Winners Of Akili Kali Innovation 





About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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