Fogera District is endowed with diverse natural resources. It has huge potential water sources which are suitable for irrigation during the dry season for the production of horticultural crops mainly vegetables. However, there is a great market problem in the area associated with the nature of horticultural crops such as perishability and seasonality in production. Moreover, the area is characterized by the existence of strong brokerage activity with their economic role not known.

The main objective of this study was to analyse the economic roles played by the brokerage institutions in smallholder market linkages to market outlets in horticultural marketing and determinants of decisions on whether to use brokerage institutions or not under imperfect market condition in Fogera District, in northwestern Amhara Region particularly focusing on onion and tomato.

The result of the study showed that the brokerage institutions are characterized as urban, peri-urban and farmer brokers. There was significant brokerage activity only for onion marketing and in the case of tomato marketing the brokers act as rural assemblers. Most of the horticultural trading in the area is undertaken by credit and thrust based and in this arena brokerage institutions are playing most important role by linking smallholder farmers to market outlets.

The result of the study also revealed that smallholder farmers using brokerage institutions have got 4393.62 ETB higher net income and 13.55% of greater marketed surplus than those smallholders who do not use. Generally, the brokerage institutions are playing a significant role in forming market linkages between smallholders and wholesalers under imperfect market conditions with their limitations.

Therefore, the study highly recommends the formalization of the brokerage institutions through licensing, training and continuous follow up in the district considering the experience of ECX.

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This paper was first presented at the Nile Basin Development Challenge Science meeting. The NBDC Science meeting was held on 9 and 10 July 2013 at the ILRI-Ethiopia campus, with the objectives to exchange experiences and research results across NBDC scientists involved in the NBDC projects and to discuss challenges and possible solutions.