Financial appraisal of intercropping systems
The estimated profit, i.e. net present value (NPV) for the three year period of
banana cultivation increased with increasing banana density and also with decreasing discount rate, resulting in an increased profit to the farmer (Table 6a).
Cultivation of banana was financially viable under the first two scenarios in which
third year yield was assumed to be equal, or 75% of that produced during the second
year. Under the 'worst case' scenario No. 3, intercropping rubber with banana was
profitable only in the BBBR system and under low discount rates with a value of
6.15% for the internal rate of return (IRR). Taking the best scenario for the third year
yield, NPV in the BBBR system exceeded Rs.50,000 ha'1 at a 4.5% discount rate,
whilst the currently practised BR system achieved only Rs. 12,363. The sensitivity of
profitability to yield in the third year was reflected in the IRR which exceeded 25% in
all cropping practices for the best scenario and 12% for a 25% reduction in yield. If
yield during the third year was only 50% of that produced during the second year
(hen the IRR never exceeded 7%. Repeating the analysis, but assuming that no labour
costs were involved. IRR never fell below 23%. The highest NPV was recorded as
Ks.90,521 ha'1 for the BBBR intercrop under scenario I, without labour cost and
using a 4.5% discount rate.