Analysis of frankincense value chain in Northwest Ethiopia: Variance-weighted least-squares regression approach

• Frankincense is the first and foremost important non-timber products for income generation in the Ethiopia. • The frankincense value chain is underdeveloped in the country due to different factors. • Understanding and reducing these factors plays a great role for its sustainable value chain development. • Variance-Weighted Least square regression is used to analyze the data. • Weak value chain governance and limited upgrading mechanisms among producers highlight the need for improved organization and market information access Frankincense is the first and foremost important non-timber product for income generation in the country. However, there is a gap in the current value chain and the frankincense value chain is underdeveloped. This study was therefore designed to analyze the frankincense value chain in the Western Amhara Region of Ethiopia. The data were collected from 288 randomly selected sample respondents using interviews, focus group discussion, and observation (as a method) and a semi-structured questionnaire (as a tool). Both descriptive and econometric analyses (Variance-Weighted Least squares regression (VWLS)) were used to analyze the data. The marketing margins of the frankincense producers, collectors, wholesalers, and retailers were 20.74%, 37.18%, 17.54% and 24.54%, respectively. The profit shares of the frankincense producers, collectors, wholesalers, and retailers were 9.12%, 24.56%, 27.21%, and 39.11%, respectively. The value chain governance system was ineffective for frankincense producers due to a lack of market information (price and consumers' demand preferences) (79.68%) and a weak organizational structure (99.33%) among the frankincense producers. The frankincense producers mainly (50.82%) used the functional upgrading. Lack of tapping experience or poor knowledge on the production of frankincense, poor infrastructure and market access, lack of processing industries, poor handling and storing practices, lack of value-added activities, lack of continues follow-ups and support of cooperatives, deforestation (for agricultural expansion, fuel and construction) were the main constraints of the frankincense value chain. The VWLS regression results revealed that the frankincense market's experiences, selling price, access to market information, sex, cooperative membership, livestock and crop production involvement were significant factors affecting the amount of frankincense supplied to the market. Therefore, designing policies towards improving production practices, markets access, and increasing consumer awareness should improve frankincense value chain.