Bluecare Insurance Brokers

The Money Market
The financial markets in South Africa are often divided into capital and money markets.

The capital markets regulate the flow of long-term funds(such as gilts, bonds and government stock) whereas the money market regulates the flow of short-term funds. The dividing line is usually accepted to be a term of three years. Less than three years is money market business, more than three years is capital market business.

The money markets surpose is to facilitate the flow of short-term savings from lenders to borrowers. The participants in this market include commercial banks, merchant banks, the Reserve Bank, the Post office and corporate and individual investors.

In bringing lenders and borrowers together, the banks make money by lending to the borrowers at a higher rate than they are paying the lenders. The Reserve Bank is responsible for determining the monetary policy of the country.

One of its most powerful tools in doing this is the "bank rate". This is the rate of interest that the Reserve Bank will charge the institutions when they need to borrow short-term funds from the bank. A change in the bank rate will always bring about an adjustment to the prime lending rates of the commercial and merchant banks. This adjustment helps to preserve their operating margins.
Product that can be used for money market or save savings is savings accounts, money market account, money market unit trusts, 30 day notice accounts, etc.