The development of financial markets in a country does increase its productivity. A financial market is a venue for the transfer of funds from those with excess capital or funds to those who are in need of the same. A developing financial market may help an economy prosper and become more productive in several ways. In the capital markets, enterprises wishing to secure more funds for operations and expansion can obtain funds by holding an initial public offering or an “IPO”, thus becoming a public organization. It is then bound by the designated financial and commercial laws of the land such that it conducts its business prudently, and is aware of its comprehensive responsibility to its investors (Wright and Quadrini, 3). Another way is through an intermediary. A bank lends funds to a would-be entrepreneur who knows that his business will be a success. The bank is also bound by certain rules, and will definitely not lend its funds to an entity that cannot deliver on its promise. Banks are able to separate the good borrowers from the bad (European Central Bank: Speech Delivered by Willem Duisenberg, President of the European Central Bank). The very volatile business climate in the recent years has indeed given new meaning to the term “relationship banking”. Banks that are able to cultivate good professional relationships with their clients are able to help them pull through even the most trying of economic times today. In the end, financial markets are able to help jumpstart enterprises by not only providing entrepreneurs with the needed funds, but by also selecting and channeling the resources to the most productive endeavors. With growing enterprises, there is more employment, and productivity then increases in the end, ultimately leading to progress and development.
Works Cited
European Central Bank. Speech Delivered by Willem Duisenberg, President of the European Central Bank. 2001. Web.
Wright, Robert and Quadrini, Vincenzo. Money and Banking. 2009. Washington, DC: Flat World Publishing. Print.
