Spanning the Chasm: Uniting Theory and Empirics in Microfinance Research

This paper reviews recent theoretical and empirical work on microfinance, and highlights common themes and their inter-connections.

Theory and empirical work have developed relatively independently in microfinance. The paper discusses how future research can bridge this gap. It states that:

• Practitioners’ work gives researchers the basic material to think about what does and does not work;
• Researchers use theory and empirical work to establish broad patterns or stylized facts that serve as benchmarks for practitioners in program design and analysis;
• Randomized experiments can play an important role in bridging the gap between academic research and practitioners’ work;
• Research should use theory to design future experiments and use results from these experiments to refine and extend theoretical understanding.

The paper stresses the need for research to use existing or new theory to design future experiments and as the ex ante framework for more empirical work. It presents work in repayment frequency to illustrate the importance of unifying research and practice.