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All Journal ASA: Journal ofAgribusiness and Sustainable Agriculture
Fauzany Ahsa Muhammad
IPB University
Agriculture, Biological Sciences & Forestry

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Financial and Economic Feasibility of Smallholder Oil Palm Plantations: Investment Implications in Rokan Hilir Regency Daffa Ibra Danendra; Ni Ketut Dela Yanti; Nisayu Kurniawati; Ghery Rivanio Idzal; Fauzany Ahsa Muhammad
ASA : Agribusiness and Sustainable Agriculture Vol. 2 No. 2 (2026): July 2026
Publisher : Universitas Satya Terra Bhinneka

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Abstract

Introduction/Main Objectives: This paper analyzes the financial and economic feasibility of a smallholder oil palm plantation producing fresh fruit bunches (FFB) in Bagan Timur Village, Bangko District, Rokan Hilir Regency. Oil palm plays a crucial role in rural income generation and regional economic development, yet feasibility assessments at the farm level are still largely limited to financial indicators, overlooking broader economic and environmental dimensions. Background Problems: The core problem addressed is the lack of integrated feasibility studies that incorporate both private profitability and economic externalities; the research asks whether smallholder oil palm farming remains viable once these factors are considered. Novelty: The novelty of this study lies in integrating financial and economic feasibility analysis by applying shadow prices, including carbon sequestration valuation, to a smallholder FFB-based oil palm system. Research Methods: A case study approach was employed using primary data collected in August–September 2025 through interviews, observations, and farm records. Standard investment criteria (NPV, Net B/C, Gross B/C, IRR, and Payback Period) were applied under financial and economic frameworks. Finding/Results: The results show that the plantation is financially and economically feasible, with positive NPVs, B/C ratios above one, IRRs exceeding discount rates, and acceptable payback periods. Conclusion: The findings confirm that smallholder oil palm farming remains viable even after accounting for economic and environmental costs, underscoring the importance of comprehensive feasibility analysis for sustainable investment decisions.
Co-Authors Daffa Ibra Danendra Ghery Rivanio Idzal Ni Ketut Dela Yanti Nisayu Kurniawati