Assessing the Financial Risks in Guava Cultivation in the Pabna District of Bangladesh

Abstract

Guava cultivation in Bangladesh is vital for being the sources of cancer prevention agents, vitamin, beta-carotene, zinc, copper, manganese, etc, which are fundamental for human body. The major objective of the study was to measure the financial risks in guava cultivation in Pabna district of Bangladesh. In order to measure the financial risks in guava production, the research studied the nature of NPV of guava orchards in the Pabna district of Bangladesh. For this purpose, the study estimated the average total net cash flows of each year by considering all the possible costs and benefits associated guava production for the selected orchards to determine their NPVs. A set of cross-sectional data on the selected variables has been used for the analyzing purpose of the research. A multi-stage sampling technique consists of purposive, cluster and simple random sampling has been applied for the selection of 100 guava orchards, from two upazilas of the district. Subsequently, a structured questionnaire composed of both open and closed-ended questions has been used for collecting data from the sample guava producers with the help of face-to-face interview method. The study employed simulation analysis to assess the financial risks in guava production in the selected area. The results revealed that the values of total net return in the first five years are negative, it become positive in the sixth year and thereafter. The value of total net return in the seventh year is BDT 63433 per bigha (1 bigha equals about 0.1335 hectare) and it continues to be stable up to 25 years of age of the guava plantation. The 1000 runs of simulation of NPV of guava orchard given that the NPV ranges from -BDT 18302.3 per bigha to BDT 184866 per bigha with a mean value of BDT 80649.51 per bigha. The distribution of the NPV which evident that the probability of a higher value or negative value of NPV is very low. The moderate value of NPV is the most likely outcome. The results of the simulation analysis inferred that the investment in the guava orchard is neither highly profitable nor loss-making which means that investment in this project bears a very low financial risk.