The role of financial literacy, government assistance programs and entrepreneurship development on social welfare

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Abstract

Improving social welfare remains a central goal of economic development, with human capital development serving as a key determinant in achieving it (Goldin, 2024). However, limited financial literacy, unequal access to entrepreneurship opportunities, and the short-term nature of government assistance programs often constrain welfare improvement. This study aims to examine the effects of financial literacy, entrepreneurship development, and government assistance programs on social welfare, with human capital development as a mediating variable. A quantitative approach using structural equation modeling — partial least squares (SEM-PLS) was applied to 237 micro-business entrepreneurs in Central Java province, selected through simple random sampling. Data were collected through structured questionnaires and analyzed using SmartPLS software. The results reveal that financial literacy, entrepreneurship development, and government assistance programs positively affect human capital development, which in turn significantly enhances social welfare. Entrepreneurship has both direct and indirect effects, while financial literacy and government assistance influence welfare only through human capital development. These findings emphasize that strengthening human capital is essential for achieving inclusive and sustainable welfare outcomes in developing regions (Sen, 1999).

Keywords: Financial Literacy, Entrepreneurship Development, Government Assistance Program, Human Capital Development, Social Welfare

Authors’ individual contribution: Conceptualization — I.K.; Methodology — I.K. and S.P.; Software — S.P.; Validation — I.K. and S.P.; Formal Analysis — I.K. and S.P.; Investigation — I.K. and K.; Resources — I.K., S.P., and K.; Data Curation — I.K., S.P., and K.; Writing — Original Draft — I.K.; Writing — Review & Editing — I.K., S.P., and K.; Visualization — I.K.; Supervision — I.K.; Project Administration — I.K.; Funding Acquisition — K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: I31, J2, O15

Received: 19.07.2025
Revised: 18.10.2025; 29.01.2026
Accepted: 24.02.2026
Published online: 26.02.2026

How to cite this paper: Kertati, I., Pratomo, S., & Karningsih. (2026). The role of financial literacy, government assistance programs and entrepreneurship development on social welfare. Journal of Governance and Regulation, 15(2), 36–44. https://doi.org/10.22495/jgrv15i2art3