1. Introduction
Enhancing household economic welfare is a central issue in the Indonesian government. The main goal of economic development is almost identical in various countries, which aims to alleviate poverty and enhance household welfare [
1,
2]. Living in poverty leads to a shortage of money, food and basic needs, inappropriate education, and entrepreneurship [
3]. The government has responded to this issue by promoting entrepreneurship. An active scholar believes that entrepreneurship can promote wider job opportunities that absorb unemployment [
4]. In addition, entrepreneurship also enables a household to obtain a better income, which leads to well-being [
5]. Therefore, entrepreneurship literacy is essential for individuals and households as an attempt to enhance economic welfare.
In addition to entrepreneurship, financial literacy plays a pivotal role in enlarging household economic welfare [
6]. A preliminary study remarked that saving and financial planning become essential for enhancing resilience to revenue and can increase the household well-being in the long run [
7]. Financial literacy is useful for understanding, analyzing, and making financial decisions, thus increasing entrepreneurs’ confidence in innovating and leading to household economic well-being [
8]. Another scholar mentioned that financial literacy is defined as an individual’s awareness, knowledge, and skills in making financial decisions to achieve financial welfare [
9]. This indicates that financial programming is beneficial for achieving economic well-being [
10].
To enhance household economic welfare, digital literacy is also essential for individuals in this current era [
11]. Digital literacy is required to respond to the rapid development of information and communication technology (ICT) [
12]. ICT facilitates the preparation, transmission, and manipulation of information to make it easier and cheaper [
13]. In addition, ICT has a special place as a source of information because of its ability to provide it at a more affordable cost [
14]. For example, a housewife digital literacy can provide business online, which will greatly help the family economy. An antecedent study remarked that being digitally literate can improve the welfare of the people in general and the Indonesian population in particular [
15].
Since the role of household economic welfare is critical for the economic development of a nation, its study is also on the rise. Most existing studies have linked household economic welfare with microcredit and economic growth [
16,
17]. A recent study concerned the relationship between business empowerment programs and household economic welfare among Indonesians [
18]. In China, a study mentioned that business entities can lead to family economic welfare among farmers [
19]. Despite the heightening interest in how to increase household economic well-being, existing scholars have overlooked the role of entrepreneurship and financial literacy.
We therefore set out how financial literacy and entrepreneurship literacy can lead to household economic welfare. Research to date has primarily been concerned with financial literacy and consumption behavior [
20,
21] and saving and investment behavior [
22,
23], while other studies have proposed entrepreneurship literacy as the predictor for entrepreneurial intention and activities [
24]. This study also involves social capital as a predictor for household economic behavior. The fundamental rationale is that social interaction occurs because of mutual assistance between individuals, communities, and groups to achieve common goals. A preliminary study noted a correlation between social capital and community welfare [
18].
This study proposes some essential contributions. This research makes insights into the literature on household economic behavior by examining the influence of entrepreneurship literacy, financial literacy, digital literacy, and household economic behavior, which has been overlooked in the prior literature. As mentioned previously, several previous studies solely examined the effect of social capital on household welfare by introducing the financial literacy factor [
16,
17,
18], whereas this study attempted to investigate how the role of the three essential literacies can be a factor that mediates or strengthens the effect of social capital on improving household economic welfare.
Second, it adds the insight of social capital as a predictor for Indonesian household economic welfare. The unique reason for studying in Indonesia is that Indonesia is well-known as a highly social value for helping each other in many economic and other activities. Additionally, the focus study in Indonesia is reasonable as it moves to the developing countries, but poverty and household welfare are the primary concern in the nation. Third, through an empirical examination of the nexus between social capital, entrepreneurship literacy, and financial literacy, this research can identify and inform a better policy in alleviating household economic fragility in the future.
This paper is presented as follows.
Section 1 focuses on the research background and is followed by comprehensive literature in
Section 2.
Section 3 describes the sample, study design, and data analysis. The main findings are provided in
Section 4 and discussions are presented in
Section 5.
Section 6 proposes the study’s conclusion, limitations, and suggestions for further studies.
5. Discussion
Ten assumptions were tested in this study using structural equation modeling. It is worth noting that this analysis verifies nine of the ten hypotheses proposed and denies one. In further detail, the first hypothesis indicates that social capital has a detrimental effect on household economic welfare. Therefore, the findings indicate that none of the social capital indices substantially affected a household’s economic welfare in East Java, Indonesia. According to the results of hypothesis testing, social capital has no significant effect on a household’s economic welfare in East Java, Indonesia. This finding contradicts some papers, which all find a statistically significant positive relationship between social capital and household welfare [
43,
67]. However, it supports several prior findings that social capital does not always have a significant positive effect on a household’s welfare [
68,
69]. The rationale behind this finding is that social capital enables communities to collaborate and create a network to accomplish goals, and it is insufficient for improving a household’s economic welfare. It requires a combination of knowledge and the ability to use social capital to achieve the goal of enhancing a household’s economic welfare.
The second hypothesis mentioned a positive impact between social capital and entrepreneurial literacy, which confirmed the finding of some studies [
31,
70]. The main reason is that social capital fosters community and the development of informal learning. This community serves as a platform for learning, sharing information, and implementing practices that can improve knowledge, skills, and entrepreneurial abilities. In addition, social capital can be a place for optimizing the potential resulting from long-term personal relationships with other people, becoming one of the capitals that can be used to advance their entrepreneurial literacy. A prior study stated that understanding the micro-level entrepreneurial process in subsistence marketplaces requires understanding social capital [
71]. The subsequent conversion of entrepreneurial behaviors into developing a community exchange system can be performed [
72]. An informal learning community is where learners work together to understand practical knowledge and skills. Communities of interest are informally formed groups based on shared beliefs, values, and concerns instead of locality or social patterns [
73]. Informal learning centers offer opportunities for the community to learn outside of the formal education system, particularly for adults and rural residents, and can also serve as a gathering place. Furthermore, the learning community improves their knowledge and skills, setting a positive example for young children, adolescents, and early adults by demonstrating that everyone, regardless of age or educational background, has the opportunity to learn [
74].
Third, the current finding is consistent with previous research, which found a positive relationship between entrepreneurial literacy and households’ economic welfare and confirms some previous studies [
74,
75,
76]. The basic explanation of this finding is that entrepreneurial literacy, as a critical factor in entrepreneurial activity, has a fundamental role that can shape the mentality and character of entrepreneurs. For instance, women with a high level of entrepreneurial literacy will be able to adopt appropriate business practices, such as record keeping, work plan development, and participation in value-added processes, which will increase their business potential and economic welfare [
75]. In addition, people with entrepreneurial literacy in rural areas will have entrepreneurial awareness and skills that encourage them to add value to each of their agricultural or plantation products in order to increase their income. The rural literacy community program, which aims to establish a learning community to improve literacy and reduce poverty, has demonstrated its ability to enhance the welfare of rural communities [
74].
Fourth, this study found that entrepreneurial literacy mediates social capital and household economic welfare, and this finding broadly supports the work of other studies [
77,
78]. These findings suggest that social capital in a community where knowledge about entrepreneurship is transferred will be a more assertive driving factor in improving household welfare. This indicates that households will become more prepared to make business decisions as they share entrepreneurship knowledge and experiences. Therefore, social capital combined with good entrepreneurial literacy will build a support system in a healthy business environment, reducing risk and increasing profits.
Fifth, the study indicated that financial literacy influences household economic welfare and confirmed some preliminary papers [
79,
80]. This demonstrates that an individual’s knowledge of financial products currently in use or being developed has an impact on how the individual achieves his or her welfare. Fundamentally, financial products are designed to make people’s lives easier. As a result, having a good understanding of financial products as part of financial literacy will be very beneficial in maximizing their use to achieve prosperity. In addition, poverty will be linked to a lack of financial literacy and, when an economic crisis occurs, illiteracy in financial matters will only exacerbate and prolong the crisis [
81]. The global economy’s vigorous effort to improve the financial well-being of its citizens has contributed to the growing importance of financial literacy because it equips individuals to make quality financial decisions to improve their financial well-being. Educating households on the advantages of competent savings product management can positively impact their household welfare [
79].
This sixth hypothesis in this study sought to determine the impact of social capital and financial literacy, which supports several studies [
53,
76,
82]. The underlying rationale for supporting this result is that social capital is an essential factor in financial development, which leads to the creation of more human capital. In addition, social capital is a dimension built on values, culture, perceptions, institutions, and mechanisms in positive activities to empower communities. Social capital is important in increasing various resources, including community knowledge and skills as drivers of financial literacy. For example, a study observed that social capital available to participants comprises knowledge resources and identity resources brought to the interaction by the participants individually and collectively [
83]. Social capital is the subset of these resources used to achieve the desired goal of any specific interaction that contributes to the common purpose. Furthermore, Cohen and Nelson argued that poor households participating in associational networks might improve their financial knowledge and skills, allowing them to make wise financial decisions and choices [
82].
Seventh, this study found that financial literacy mediates social capital and household economic welfare, and this finding broadly supports the findings of previous studies [
19,
84,
85]. Social capital is about solidarity, self-confidence, and facilitating business operations, and it is derived from social relationships involving family, friends, coworkers, and others [
86]. Social capital is expected to be one of the options for increasing financial literacy in Indonesia, which can improve household economic welfare. Solidarity and high trust will catalyze the development of a financial sector cooperation system based on the principle of kinship. Cooperation is an example in Indonesia, and it is a financial system that grew from the seeds of solidarity and financial literacy. Cooperation is financial institutions whose primary goal is to help their members prosper by providing financial assistance and raw materials for production [
74].
Eighth, the result of this study confirmed an indirect positive impact between social capital and digital literacy [
1,
87,
88]. The finding is rational because social capital in online community life generates information that can boost interactivity, and specifically the process of developing knowledge exchange [
87]. Since the pattern of social relations can increase knowledge from various sources, social relations in the digital community significantly increase digital literacy. This is important not only in identifying various problems encountered (and finding alternative solutions) but also in creating and capitalizing on opportunities through the use of information technology. Social media, for example, can generate information that not only spreads quickly and to a large number of people but can also create stimuli and invite direct open responses.
This study found that digital literacy can lead to household economic welfare. This finding broadly supports the work of other studies [
15,
89]. Considering its high level of efficiency, digitization can have an impact on productivity. It will also improve the quality of the work or product and reduce the time required to produce an output. In terms of marketing, digitalization or the Internet will allow business households to reach a larger market, potentially increasing the household income easily. Empirical shreds of evidence are provided that point out that the promotion of Internet infrastructure density has a positive impact on the monthly household income. This finding led to a further conclusion that the Internet does not only provide benefits to households in developed countries, as presented in earlier works, but also to those in developing countries such as Indonesia.
Lastly, the result of this study showed that digital literacy can mediate the relationship between social capital and household welfare, which is in agreement with some studies [
75,
90,
91]. The primary rationale is that social capital predicts social support, status achievement, employment, unemployment, and academic achievement, and is a useful conceptual tool for assessing the social effects of the Internet [
88]. The Internet’s social affordability, such as its convenience, social connectivity, and social cues, create different opportunities for interaction, such as social capital production, promotion, distribution, and mobilization. This social media viewpoint allows for the interaction of technology, interactions, transactions, and social structures. As a result, the Internet, through social media, provides (1) a variety of synchronous and asynchronous communication cooperation opportunities, (2) the ability to find and form new relationships, (3) the potential to expand the market by reuniting old ties, such as elementary school friends, and (4) the presence of the ability to manage the length and scope of different social interactions while carrying out other things at the same time (e.g., a form of social multitasking). Furthermore, various social media (e.g., social networking sites, instant messaging sites) enable people to collect social information, interact with others, and coordinate and manage their business at a lower cost, with an extensive social network, to increase income and improve a household’s economic welfare.
6. Conclusions
The purpose of this study was to look into the relationship between social capital, financial literacy, entrepreneurial literacy, digital literacy, and household welfare in East Java Province in Indonesia. The findings indicate the role of financial, digital, and entrepreneurial literacy in mediating the relationship between social capital and a household’s economic welfare. However, this study noted that social capital failed to explain the households’ economic welfare. Based on the discussions, this study proposes two significant implications. First, it demonstrates the importance of literacy (entrepreneurial, financial, and digital) in mediating the relationship between social capital and household welfare. In doing so, government and policy researchers can pay attention to improving these three literacies to raise household welfare.
Second, this study demonstrates that, in general, digital literacy has the potential to be used to alleviate poverty. In some cases, digitalization is not a well-integrated component of Indonesia’s national poverty-reduction strategy. More importantly, most of those who benefit from ICT development in the country have the resources and skills, leaving a large portion of the poor behind. With a large population and distinct characteristics of the poor, current government policies aimed at lowering the national poverty rate, and the potential of digitalization as a direct source of livelihood for the community, various approaches involving government intervention are required. In addition, social capital itself is not always enough to improve household welfare, but it will be more beneficial if it is accompanied by excellent entrepreneurial, financial, and digital literacy.
As with other studies, this study has some limitations. The first concerns the demographical matter, which solely involves households in East Java of Indonesia. Thus, further research can involve other regions in Indonesia. In addition, the response rates in this research counted fewer than 400 respondents, and further scholars can enhance this number with a particular sampling method to reach more robust and generalized results.