Abstract
The purpose of economic development is to improve people's prosperity. National economic growth is largely determined by the dynamics of regional economy, while regional economy is generally supported by MSME-scale of economic activities, one of them is the sector of handicraft. The empowerment of MSMEs is aimed at making prosperous lives of MSME subject. To obtain a prosperous life, small and medium enterprises in Denpasar have many limitations, therefore this business has not been able to be optimally developed, especially during COVID-19 pandemic. The purpose of this research is to analyze (1) the influence of financial performance and capital expenditure on economic performance; (2) the influence of financial performance, capital expenditure and economic performance on people's prosperity; and (3) analyze indirect effect of financial performance and capital expenditure on people's welfare through economic performance in districts and cities of Bali. This research was conducted toward 97 samples and data collection was carried out through questionnaire. The analysis was done by SEM-PLS method. The results of research and data analysis indicated that (1) the role of government has positive and insignificant effect, while social capital has significant positive effect on business performance; (2) the role of government, social capital, and business performance have positive and significant impact on business prosperity and (3) the role of government does not have an indirect effect, while social capital has indirect effect on business prosperity through business performance. Government plays an important role in empowering MSMEs. Government has not been able to improve business performance however they are able to improve the prosperity of a business subject. Social capital is able to improve business performance and business subject prosperity, moreover, business performance is able to mediate the relationship of social capital to the people prosperity in Denpasar.
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