Financial Literacy, Digital Financial Literacy and Women’s Economic Empowerment

Abstract

There have many been studies on women’s economic empowerment (WEE), most related to financial literacy (FL). However, in this digital era marked by the emergence of Fintech, FL needs to be expanded into digital financial literacy (DFL), in making good financial decisions, especially regarding Fintech products. Hence, the study aims to investigate the influence of DFL and FL on WEE. In this study, 259 female respondents participated. Using the PLS Structural Equation Modelling, the study found that both DFL and FL had a positive and significant effect on WEE. However, further analysis found that DFL affects all 5 dimensions of WEE. Meanwhile, FL only affects 3 components of WEE. In addition, the results also show that DFL has a much greater influence on WEE compared to FL. These results prove that, in this digital era, FL is not sufficient for making good financial decisions, but more understanding is needed, especially related to digital literacy. These results are expected to provide a new understanding of the importance of the DFL variable in the study of WEE, as well as input for the Indonesian government to give more consideration to DFL in making policies related to WEE.

Digital financial literacy and financial well-being

“…Another noteworthy finding was that DFL had a larger marginal effect on financial well-being compared to financial knowledge. This finding confirms previous evidence that digital literacy is an independent predictor of financial behavior and well-being, after controlling for financial literacy (Kass-Hanna et al, 2022;Lyons and Fontes, 2021;Rahayu et al, 2022b), and highlights the prominent role of digital skills in the digital finance context. As discussed above, DFL is a broad concept that encompasses knowledge, skills, and ability to use digital financial instruments, as well as the technical competency to safeguard against cyber threats.…”

“…There exist only a few studies that have examined the relationship between DFL and financial well-being (Jhonson et al, 2023;Rahayu et al, 2022b). Lyons and Fontes (2021) examined the nationally representative sample in the US to show that digital literacy, financial literacy, and social media use are associated with household portfolio outcomes.…”

“…Financial hardship and stress were found to predict financial well-being (Lacombe and Khatun, 2023), and mediate the effects of financial literacy and financial behaviors (Fan and Henager, 2022;Zhang and Chatterjee, 2023). Digital financial literacy was associated with increased use and awareness of mobile financial services (Long et al, 2023;Yoshino et al, 2020), positive financial behaviors (Rahayu et al, 2022a), and ultimately financial well-being (Jhonson et al, 2023;Rahayu et al, 2022b).…”

Financial Well-being in Digital Environment: Evidence from Indonesia

“…One of the important factors identified as the determining factor of financial well-being is the demographic factor consisting of age, education level, marital status, the amount of income and domicile. This is in line with the results of research conducted by (Rahayu et al, 2022). To confirm the results of the FGD above, then this study tried to conduct a survey by measuring financial well-being for each group of respondents and comparing the average score for each group of respondents.…”

“…But unfortunately, in the document, no clear definition has been given of this financial situation. Some literature in Indonesia, both in the form of books and research related to financial well-being, mostly uses the concept of financial well-being developed in other countries (Rahayu et al, 2022;Lutfi et al, 2020). As we know, each country has social, political, economic, and cultural conditions that are different from other countries, so of course the concept developed from a certain country, of course, it cannot necessarily be applied in other countries, including Indonesia.…”