Determinants of Ethiopian Commodity Exchange Participants Membership Category

Abstract

Purpose: The Ethiopian Commodity Exchange (ECX) was established to revolutionize Ethiopian agriculture and transform the economy through introducing a dynamic, efficient and transparent marketing system. Properly implemented and regulated, commodity exchanges can contribute greatly to the achievement of a country’s economic and developmental goals and strengthen the bargaining power of participants. Hence the overall objective of this study is to assess the trading practices and challenges of the newly established commodity exchange in Ethiopian. Design/Methodology/Approach: The study adopted a descriptive cross-sectional research design. Using a structured questionnaire survey by interviewing a sample of 80 randomly selected participants an analyzed using both descriptive and inferential data analysis techniques. Findings: The study found that practicing an open outcry and spot contract trading system. Results of the econometric-model analysis revealed that time of participation, limited membership seat, membership seat fee and occupation were found to be significant predictors that influence the choice of membership category. Result of the study also indicated that lack of adequate warehouses, grading and sampling system, higher penalty cost related to warehouse service, availability of in-store credit, higher membership seat fee and transaction cost, were found to be some of  constraints that hinder participants from the smooth functioning of transactions in the exchange.Originality/value: This study is important especially to policymakers and development practitioners to make informed decisions in an effort to transform the economy through strengthening transparent marketing system in the country. In this regard, this study provides valuable information and evidence on the performance and challenges of ECX.

Keywords: ECX, ECX participants, trading practice, quality grading system, market information system

DOI: 10.7176/RJFA/11-17-04

Publication date:September 30^th 2020