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Financial Markets Role in Economic Development

Financial markets play a very vital role in economic development. They are the channels through which money flows from cash-generating units to financially challenged units, where they need appropriate channels to meet their financing requirements, whether individuals, institutions or the government sector Regardless of whether they are local or global markets, they contribute significantly to economic development.
Financial markets play a vital role in economic development and enterprise success
The concept of financial markets

Financial markets are a mechanism that allows individuals and institutions to buy and sell financial assets such as stocks, bonds, currencies, derivatives, commodities and other tradable assets at the lowest cost and at a market-specific price in the supply and demand cycle.

Financial Markets Role in the economic development process

1. Mobilization of financial savings

Financial markets contribute to the development of people’s savings habits by encouraging them to invest their money and savings in savings means that provide them with additional income easily and provide them with the liquidity to sell their shares and benefit greatly from them.

2. Provide liquidity to investors

The financial markets play a positive role in the financing of various economic projects while providing the best facilities that provide investors with the burden of repayment, as its leading role in the mobilization of financial resources and savings and directed towards productive investments, for the benefit of all parties.

3. Predict the state of the economy and take appropriate action

Stock market prices are an indicator of the future economic situation of the country. It is also an early warning to the economic affairs of the UAE to take the necessary steps and proper procedures when necessary. The decline in stock prices is a dangerous indicator of the economy’s recession. Is a great indicator of the coming stage of recovery in the financial market.

4. Transferring excess liquidity to shareholding companies, investment funds and portfolio management companies

The market contributes to encouraging the establishment of joint stock companies, investment funds and companies specialized in the management of financial portfolios, which fit the nature of savings habits, allowing citizens to invest capital within the capital of the company or investment funds, which can undertake various development projects, which helps to increase support for investment opportunities and employment, Providing new job opportunities that reduce unemployment rates.

5. Control the performance of companies

The stock exchange is a highly efficient regulator of the policies of companies whose securities are traded through the stock exchange. Companies whose management is managed by highly efficient investment, operation and financing policies improve their stock prices easily on the stock exchange, unlike companies that manage their securities. They end up with unsatisfactory business results and their equity prices fall.

Types of assets and securities in the financial markets

Stock market

It allows for the sale and purchase of shares of companies traded on the stock exchange called Al-Ansah market.

Off-Exchange Trading Market

The OTC is a decentralized market with no specific geographical position where participants trade directly through a number of communication methods such as telephone, mail and special trading systems.

Bond markets

Is a market for all types of bonds and where organizations are going to get large loans in general.

Money market

The money market refers to markets where short-term financial instruments are traded.

Derivatives Market

A financial instrument that is derived from the value of other assets and therefore its value depends on the value of other assets in the market.

Forex Market

The foreign exchange market, the largest financial market in the world, the exchange rate is constantly changing.

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