What do financial markets provide?

Financial markets serve as crucial institutions within the economy, where savers can supply funds to borrowers. This function plays a vital role in facilitating the flow of capital, which allows individuals, businesses, and governments to access the necessary funds for various ventures.

By connecting those who have excess funds—like savers and investors—with those who need funds—like borrowers and businesses—financial markets contribute to economic growth and development. The interaction in these markets ensures that resources are allocated efficiently, which can lead to innovation, job creation, and improved overall economic welfare.

While some may think financial markets are exclusively for government spending or focused solely on wealthy individuals, the reality is that they encompass a broad array of participants, providing opportunities for a wide segment of the population to engage in lending and borrowing activities. The notion that they are only a venue for trading commodities is also too narrow, as financial markets cover various types of financial instruments and assets beyond just commodities, including stocks, bonds, and derivatives.