Problems and Prospects of Capital Market in Bd

3784 Words Aug 9th, 2011 16 Pages
Problems and Prospects of Capital Market
In Bangladesh

What is Capital Market?

A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Financial regulators, such as Securities and Exchange Commission (SEC) for Bangladesh or for the UK Financial Services Authority (FSA) oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud,
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These two kinds of activities keep the capital market going. Surplus Unit:
Surplus Unit has enough funds over all of their liabilities to invest in the capital market. It may broadly be classified into two investors (i) Individual Investors; (ii) Institutional Investors.
(i) Individual Investors: Individual Investors participate in the capital market through purchasing Govt. Bonds & Notes, Public Limited Co.’s shares, or mutual funds.
(ii) Institutional Investors: When the institutional investors have surplus funds that are not needed for a short time period, they seek to make money from their cash surplus by purchasing securities from the market. Institutional Investors may be Commercial Banks, Insurance Companies, Leasing Companies, Investment Corporation Bank (ICB), Asset Management Companies, and various other companies. Deficit Unit:
Deficit Unit usually takes loans or capital by selling bonds or shares to the surplus Unit to arrange necessary funds for investment in different promising business. Deficit group may further be classified into two groups (i) Government; (ii) Public Limited companies.
(i) Government: The Government of Bangladesh always experiences its expending requirements exceed their tax revenues. To balance this difference, it needs to collect fund through borrowing. Government also borrows on behalf of nationalized industries, municipalities, local
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