FACTORS AFFECTING THE CONTRIBUTION AND CHALLENGES OF MARKETING MEMBERSHIP PRACTICE: THE CASE OF ETHIOPIAN COMMODITY EXCHANGE (ECX)

Abstract

The Ethiopian Commodity Exchange was established to revolutionize Ethiopian agriculture and transform the economy through 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 was to assess the contribution and identify the challenges of marketing membership practice of the Ethiopian commodity exchange. And the variables that were assessed and identified were market information system, trading practice, liquidity, warehouse and quality grading and regulation. A survey questionnaires and interviews was prepared to collect a primary data, secondary data from the documents of the ECX and other sources were also used to augment the primary data. The questionnaire was distributed to 80 Ethiopian commodity exchange member participants randomly and out of which 68 were returned. The data was collected through cross-sectional survey. And the data was analyzed through descriptive analysis and multiple linear regression model by using SPSS version 20. The result shows Ethiopian commodity exchange was practicing an open outcry trading system and spot contract. The multiple linear regression model results verified that educational status, membership requirement, warehouse quality service, ICT facility, membership seat fee were found to be significant variables with the choice of membership. Apart from this according to the descriptive analysis lack of adequate warehouses, grading and sampling system, higher penalty cost for the delay made to withdraw commodities from the warehouses on time, availability of in store credit,corruption, bias, 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. Finally, The paper recommend: the goal of risk management and reduced transaction costs in the Ethiopian commodity exchange might be achieved more effectively through investment in ICT facility, warehousing, market information system, electronic type of trading system, training and capacity building, measuring instruments, the financial membership criteria which could support future establishment of commodity exchange.