Capital Markets

These are markets for long term funds with maturity period of more than one year. E.g. markets for Financial instruments used here are debentures, terms, loans, bonds, warrants, preference shares, ordinary shares etc. The capital market serves as a way of allocating the available capital to the most efficient users.

Capital market financial institution includes:
1. Stock exchange
2. Development bank
3. Hire purchase companies
4. Building societies
5. Leasing firms

Functions of Capital Markets are:

1. Providing long term funds which are necessary for investment decisions.
2. Provide advice to investors as to which investments are viable.
3. Long term investments are made liquid, as the transfer between shareholders is facilitated.
4. Facilitates the international capital inflow.
5. Facilitating the liquidation and marketing of a long term
6. Acting as a channel through which foreign investments find their way into the market.