Studies carried out by the World Bank have shown that direct cash transfers foster people's resilience to the adverse effects of external shocks by lowering income risks and facilitating savings. Direct cash transfers also contribute to helping children stay in class in times of crisis, which often lead to a drop in attendance (see Finan et al 2004, Premand and Stoeffler 2020).
During the recent Covid-19 pandemic, researchers also found that direct cash transfers both reduced poverty as well as enabled unemployed recipients to look for work. Those who received payments could be more active and engaged in society, which ultimately aids labor market recovery (see Köhler and Bhorat 2021).
In addition, a recent study suggests that direct cash transfers may even reduce deforestation because recipients do not have any need to insure themselves by earning money through forest clearing work (Ferraro and Simorangkir 2020).