Ethiopia’s growing commodity exchange
Just a few years ago Eleni Gabre-Madhin was an IFPRI researcher studying market inefficiencies and institutional design in the developing world. Today she’s putting that research into practice as CEO of the Ethiopia Commodity Exchange (ECX). In a new essay, A Market for Abdu, published by IFPRI, Gabre-Madhin explains how research informed the development of the ECX and what it took to build a well-functioning market from scratch.
In the mid-2000s, Gabre-Madhin’s work on the need for a commodity exchange in Ethiopia found a hearing at high levels there. She was invited to lead the effort to design an exchange, which debuted in April 2008 under her leadership.
The ECX gives buyers and sellers of five commodities—coffee, sesame, haricot beans, wheat, and maize—the opportunity to trade with assured quality, delivery, and payment. These guarantees are unheard of in most other parts of the resource-poor developing world.
The exchange started relatively small but grew fast. In its first year the ECX traded 108,000 tons of commodities. By 2010–11 the volume had risen to 508,000 tons valued at US$1.1 billion. The exchange’s 11,200 customers buy and sell through 450 exchange members who make deals on the trading floor in Addis Ababa. The crops that are traded pass through 55 warehouses with the capacity to hold 47 million bags. Farmers can see prices at dozens of electronic tickers throughout the country.
Now Gabre-Madhin is focused on expanding the reach of the “Ethiopian model” beyond the country’s borders. Over the past three years, representatives of 18 African countries have come knocking to find out how to launch a similar market in their respective countries. Representatives from Afghanistan, Haiti, and the Philippines have also taken an interest in the ECX.
These visitors, she says, represent “the whole spectrum of countries,” including those that hope to build markets from the ground up and those that have tried—but failed—to set up an exchange and want to learn from Ethiopia.
“The researcher in me is still very much part of how I have been leading the institution as a practitioner,” she said. “I think it’s been very beneficial that I come into the job with a deep knowledge of both the research questions involved and the wider context.”