IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0333780.html
   My bibliography  Save this article

Business sustainability of medicinal plant production under risk in the northwest region of Bangladesh: A simulation analysis

Author

Listed:
  • Md Abu Saiyem
  • Mst Fatema Begum
  • Mst Esmat Ara Begum
  • Mohammad Ismail Hossain

Abstract

Medicinal plants (MP) provide an opportunity for profitable farming, agricultural diversification, and sustainable livelihoods in Bangladesh. This study aims to examine the business sustainability of MP production under risks, i.e., price, yield and market absorption. Data were collected from 196 individual farms that cultivate Aloe vera (L), Bombax ceiba (L) root, and Withania somnifera (L). The business viability analysis was carried out by evaluating the net present value (NPV), internal rate of return (IRR), benefit-cost ratio (BCR), return on investment (ROI), and real option value (ROV) of selected MP. The results indicated that the NPV was positive, the BCR was greater than 1, and the IRR exceeded the prevailing bank rate. It also found that the production of MP faces three major risks: pricing, yield, and market absorption. The simulation analysis’s findings indicated that MP producers will eventually experience losses with embedded risks. On the other hand, the ROV finding indicated that NPV increases with option value over time. Farmers may receive profit from their investments in A. vera, B. ceiba root, and W. somnifera, and their farming business will eventually become sustainable in the long run. Thus, farmers should plan for producing MP in the long run and policy should be triggered on tackling risk reduction strategies through introducing marketing contract.

Suggested Citation

  • Md Abu Saiyem & Mst Fatema Begum & Mst Esmat Ara Begum & Mohammad Ismail Hossain, 2025. "Business sustainability of medicinal plant production under risk in the northwest region of Bangladesh: A simulation analysis," PLOS ONE, Public Library of Science, vol. 20(10), pages 1-22, October.
    • Handle: RePEc:plo:pone00:0333780
    DOI: 10.1371/journal.pone.0333780
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0333780
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0333780&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0333780?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    2. Asci, Serhat & VanSickle, John J. & Cantliffe, Daniel J., . "Risk in Investment Decision Making and Greenhouse Tomato Production Expansion in Florida," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(4), pages 1-26.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oscar Gutiérrez & Francisco Ruiz-Aliseda, 2011. "Real options with unknown-date events," Annals of Finance, Springer, vol. 7(2), pages 171-198, May.
    2. Arve, Malin & Zwart, Gijsbert, 2023. "Optimal procurement and investment in new technologies under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 147(C).
    3. Marks, Phillipa & Marks, Brian, 2007. "Spectrum Allocation, Spectrum Commons and Public Goods: the Role of the Market," MPRA Paper 6785, University Library of Munich, Germany.
    4. Pierre‐Richard Agénor, 2004. "Macroeconomic Adjustment and the Poor: Analytical Issues and Cross‐Country Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 18(3), pages 351-408, July.
    5. Atal, Vidya & Bar, Talia & Gordon, Sidartha, 2016. "Project selection: Commitment and competition," Games and Economic Behavior, Elsevier, vol. 96(C), pages 30-48.
    6. Prelipcean, Gabriela & Boscoianu, Mircea, 2019. "Aspect Regarding the Design of Active Strategies for Venture Capital Financing – the Flexible Adjustment for Romania as a Frontier Capital Market," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2019), Rovinj, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Rovinj, Croatia, 12-14 September 2019, pages 187-196, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    7. Waters, James, 2015. "Optimal design and consequences of financial disclosure regulation: a real options approach," MPRA Paper 63369, University Library of Munich, Germany.
    8. Golub, Alexander (Голуб, Александр), 2018. "Methodological Issues of Assessing Investment Risks in Projects Weakening the Dependence of the Russian Economy on Natural Resources and Providing a Transition to Low-Carbon Development [Методологи," Working Papers 071802, Russian Presidential Academy of National Economy and Public Administration.
    9. Suleyman Basak & Georgy Chabakauri, 2012. "Dynamic Hedging in Incomplete Markets: A Simple Solution," The Review of Financial Studies, Society for Financial Studies, vol. 25(6), pages 1845-1896.
    10. Casper Agaton, 2017. "Coal, Renewable, or Nuclear? A Real Options Approach to Energy Investments in the Philippines," International Journal of Sustainable Energy and Environmental Research, Conscientia Beam, vol. 6(2), pages 50-62.
    11. Pringles, Rolando & Olsina, Fernando & Penizzotto, Franco, 2020. "Valuation of defer and relocation options in photovoltaic generation investments by a stochastic simulation-based method," Renewable Energy, Elsevier, vol. 151(C), pages 846-864.
    12. Jaewon Jung, 2023. "Multinational Firms and Economic Integration: The Role of Global Uncertainty," Sustainability, MDPI, vol. 15(3), pages 1-18, February.
    13. Alvarez, Luis H. R., 1998. "Exit strategies and price uncertainty: a Greenian approach," Journal of Mathematical Economics, Elsevier, vol. 29(1), pages 43-56, January.
    14. Arora, Ashish & Fosfuri, Andrea, 1999. "Exploring the internalization rationale for international investment: wholly owned subsidiary versus technology licensing in the worldwide chemical industry," DEE - Working Papers. Business Economics. WB 6430, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    15. Chen Yu-Fu & Funke Michael, 2004. "Working Time and Employment Under Uncertainty," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(3), pages 1-23, September.
    16. Nick Bloom & Stephen Bond & John Van Reenen, 2007. "Uncertainty and Investment Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 391-415.
    17. Keppler, Jan Horst & Quemin, Simon & Saguan, Marcelo, 2022. "Why the sustainable provision of low-carbon electricity needs hybrid markets," Energy Policy, Elsevier, vol. 171(C).
    18. Song, Dandan & Wang, Huamao & Yang, Zhaojun, 2014. "Learning, pricing, timing and hedging of the option to invest for perpetual cash flows with idiosyncratic risk," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 1-11.
    19. Khanh Hoang, 2022. "How does corporate R&D investment respond to climate policy uncertainty? Evidence from heavy emitter firms in the United States," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(4), pages 936-949, July.
    20. Sauer, Johannes & Zilberman, David, "undated". "Innovation Behaviour At Farm Level – Selection And Identification," 83rd Annual Conference, March 30 - April 1, 2009, Dublin, Ireland 51073, Agricultural Economics Society.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0333780. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.