Capital markets are important because they :
1. Help the development and growth of economic.
2. Aid economic development and growth.
Basically capital markets are the stock markets and the bond markets. The stock markets are those which provide finance though the issuance of the shares. In the bond markets, finances are collected by issuing the bonds. Capital markets are very important for the companies because they provide a way to the companies to collect finance to operate their businesses. These markets also provide the liquidity option to the shareholders to pay back the shares to take money out of the market. Any investor is willing to invest in the stock only if they have the option to liquidate and this is only provided through capital markets.
On the other hand, money markets are the markets which offer the short term investments and debt financing. There are limited authorized shares of the companies and if they need extra finances for the business, they issue bonds and other short-term securities to raise funds. These markets give a platform to the borrowers and lenders to make money transactions. People who buy securities get the interest payments on the securities and companies which raise funds, use that funds in business operations. That's why money markets provide an investment opportunity to the people who have idle money and those who need money can raise money through this market.
Functions of capital market