Spanning the Chasm: Uniting Theory and Empirics in Microfinance Research

Microfinance continues to play an ever increasing role in approaches topoverty alleviation around the world. Yet despite the attention paid tomicrofinance, the design of credit contracts for small uncollateralized loansremains a bit of a mystery. From its inception, microfinance generated agreat deal of interest from economic theorists. Influential papers from Besleyand Coate (1995), Stiglitz (1990) and Varian (1990),1 to name just a few,sought to explain the economic foundations of this novel lending mechanism.Yet empirical research testing these theories was for a long time largely absent. Recently, the area has seen a surge of empirical work, chiefly inthe form of randomized field experiments.[...]