Shunt capacitors are broadly applied in distribution systems to scale down power losses, improve voltage profile and boost system capacity. The amount of capacitors added and location of deployment in the system highly determine the advantage of compensation. A novel global harmony search (GHS) algorithm in parallel with the backward/ forward sweep power flow technique and radial harmonic power flow was used to investigate the optimal placement and sizing of capacitors in radial distribution networks for minimizing power loss and total cost by taking account load unbalancing, mutual coupling and harmonics. The optimal capacitor placement outcomes show that the GHS algorithm can reduce total power losses up to 60 kW and leads to more than 18% of cost saving. The results also demonstrate that the GHS algorithm is more effective in minimization of power loss and total costs compared with genetic algorithm (GA), particle swarm optimization (PSO) and harmony search (HS) algorithm. Moreover, the proposed algorithm converges within 800 iterations and is faster in terms of computational time and gives better performance in finding optimal capacitor location and size compared with other optimization techniques.