Development of Capital Market in Bangladesh

Abstract

The capital market is the market for long-term loans and equity capital. Developing countries in fact, view capital market as the engine for future growth through mobilizing of surplus fund to the deficit group. An efficient capital market may perform as an alternative to many other financing sources as being the least cost capital source. Especially in a country like ours, where savings is minimal, and capital market can no wonder be a lucrative source of finance. The securities market provides a linkage between the savings and the preferred in- vestment across the business entities and other economic units, specially the general households that in aggregate form the surplus savings units. The stock market enables all individuals, irrespective of their means, to share the increased wealth provided by competitive enterprises. Thus, the greatest economic importance of securities market at this point can be understood from the opportunities being lost. Bangladesh having its target to become a middle- income country must have significant level of rise in investment, which at the present state of banking system cannot be met. The securities market could play the key role in meeting these huge investment demands if the secondary market would remain stable. The capital market also helps increase savings and investment, which are essential for economic development. Through condition of capital market is not good in our country. Last few years share price falling and general share index is decreasing. Investor of our country lost their faith about capital market. Many reasons behind of this. Political instability week rules and regulation, insider trading, knowledge of investor about capital market etc. Various factors influencing the development of capital market. Those are interest rate, inflation rate, exchange rate, rules and regulation, insider trading, technology, transaction cost, systematic risk etc. For development of capital market, we should amend our rules and regulation stopping insider trading and reducing transaction cost.