When one thinks of Ethiopia, sesame is not the first that comes to mind. Sesame, however, is Ethiopia’s second most important agricultural export, and an important income source for many small-scale farmers. Ethiopia’s government established the Ethiopian Commodity Exchange (ECX) to improve the marketing of sesame.
This study explores the impact of the ECX on the institutions undepinning sesame markets, by interviewing farmers and traders before and after the ECX became mandatory for sesame trade in 2009. It finds that the ECX improved transparency in sesame markets, and as a result improved farmers’ beliefs about opportunistic behaviour of traders, and farmers’ willingness to establish long-term relational contracting with traders. It finds however, that the ECX deteriorated the social capital relations between traders, resulting in a decrease in trade credit between traders.