The rating on MiBanco, Banco de la Microempresa S.A. (Mi Banco) reflects the increasing competitive environment in the Peruvian financial system, especially in the microfinance segment. The rating also incorporates the bank's nonperforming loan (NPL) level that is higher than the Peruvian banking system average. The bank's strong profitability, strong risk management capabilities, and strong market position in the Peruvian microfinance sector counterbalance the weaknesses. As of Sept. 30, 2010, the adjusted capital-to-assets ratio--according to Standard&Poor's methodology--was adequate at 8.6%. Given portfolio high growth prospects in the next three years, Mi Banco may struggle to maintain its capitalization level, which will be dependent upon the company's ability to retain earnings or to obtain other capital injections. The bank's
