A stock market is a market (like any other market that sells such commodities as clothes, shoes, electronics etc.) The only difference is a stock market trades products known as securities. These securities can be shares (equities), bonds (government and corporate), commercial papers, treasury bills, Commodities (coffee, tea) etc.

In Kenya, the Nairobi Stock Exchange (NSE) is the only stock market and the tradable securities (commodities) include shares and bonds. Another name for shares is Equities, while bonds are also known as Debt Instruments. These products are in one name called Securities and their price varies according to supply and demand forces prevailing in the market. At the moment, there are over 50 different types of shares and over 60 types of bonds traded at the NSE.

The stock market refers to markets where companies, the Government and municipal councils go to look for long term finance (or money) to meet their financial needs. Also the stock market is a place where ordinary “wananchi “ can create wealth or make money by buying and selling company shares or government bonds. In simple, The Stock Market provides a source of income to many people.

The role of stock market is to act as a meeting point where people who are looking for opportunities to invest (investors), are brought together with people looking for money for their businesses (businesspeople). Hence the business people are said to have gotten long term finance (loans) from the investors.

This long term finance (loan), usually more than one year, is necessary where very expensive projects are involved such as construction of roads and bridges, or projects which take a long time to make profits.

Examples of people who go to look for long term finance (loans) are businesspeople who want to expand their business without going to banks to borrow money. Banks are known to offer money that has to be repaid at expensive rates of interest and at a fixed time period eg. Monthly interest payments.