Creating Domestic Capital Markets in Developing Countries : Perspectives from Market Participants
Domestic capital markets that are deep, efficient, and well-regulated can create access to long-term, local-currency finance. Interviews with market participants reveal four important findings. First, there are two distinct phases of capital market...
| Main Authors: | , |
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| Format: | Brief |
| Language: | English |
| Published: |
International Finance Corporation, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/516741587021662736/Creating-Domestic-Capital-Markets-in-Developing-Countries-Perspectives-from-Market-Participants http://hdl.handle.net/10986/33617 |
| Summary: | Domestic capital markets that are deep,
efficient, and well-regulated can create access to
long-term, local-currency finance. Interviews with market
participants reveal four important findings. First, there
are two distinct phases of capital market development, an
embryonic phase in which the government is predominant and a
mature phase in which the capital market starts to serve the
private sector. Each phase has distinct preconditions and
drivers that determine the success of capital market
development. Second, capital market development requires
continuous monitoring and policy interventions due to
changing market stages, some of them stable but suboptimal.
Third, while capital markets are a crucial source of large
volume, long-term local currency finance, they often fail
smaller countries and companies. Finally, as the capital
market develops, intangible or ‘soft’ factors become more
important, including financial sophistication, a culture of
trading and risk-taking, the quality of human capital, and
an appreciation of transparency. |
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