Role of Securities Market in Economic Development.
For rapid economic development, both direct and indirect financing should be considered complementary. The efficient and effective operation of the securities market is required to meet at least two basic requirements.
The first one is to support industrialization through savings mobilization, investment fund allocation, and maturity transformation. The second one is to be safety and efficiency in discharging the above role. In a developing country like Bangladesh, such conditions do not prevail due to the prevalence of informal credit markets. The recent development towards privatization seeks the need of efficient capital markets. It performs various functions in the process of economic development. The securities markets provide both savers and users with a broad spectrum of investment choices that can increase the level of both savings and investment. Securities markets can attract the investors as it offers a higher return to the investment portfolio. This investment portfolio easily can draw more savers in the investment process that in turn involves institutions like brokerage houses, investment banking, money investing firms, etc.
Under the scheme of Foreign Direct Investment (FDI), securities markets attract external sources in the capital market. Entrepreneurs are supposed to be provided capital procuring other factors of production that would ensure full-employment and create more productive capacity in the economy [Ahmed, 1994]. Prof. Drake [1988] in this regard, strongly argues that a securities market can achieve this type of objective. Securities markets can augment the growth; development and stability of a country’s financial structure increase the allocation of savings, allocation of existing real wealth and ensure the distribution of income. In the economic development of a country, the problem is mainly two-fold viz., increase or creation of domestic savings and transformation of more funds to an investment. Securities markets can ensure efficient allocation of savings to productive investment by the creation/development of the money market and capital market.
