During a short break in the 'Design Thinking' course I was conducting for bankers at the College of Banking and Financial Studies, I wandered into the college library — as I often do whenever I teach there.
The quiet shelves felt like old companions. I walked through the familiar corridors of Management, Accounting and Finance, and paused — almost instinctively — at the sections on Banking and Economics. These two fields have shaped my professional life for nearly three decades, and each visit still provokes fresh questions.
As I skimmed through titles on monetary theory, financial intermediation, and economic development, a thought struck me: why not write an article — not just about banking, but about the deeper economic role it claims to play?
We often repeat the standard line that “banking is a part of economics,” but rarely do we examine how banks actually behave, what their products truly achieve, and whether they still serve society in the way classical thinkers imagined.
Traditional economic theory celebrates banks as intermediaries that mobilise savings and convert them into productive investments. Joseph Schumpeter, the great economist of innovation, described banks as the 'command centres' of the economy, enabling entrepreneurs to introduce new combinations that drive growth.
The textbook model is simple and elegant: banks accept deposits, extend credit, and create money through the multiplier effect — stimulating commerce and development.
But the reality today diverges sharply from this ideal. Standing in that library, flipping through books that romanticised banking’s developmental mission, I wondered how far our real banking sector has drifted from its theoretical purpose. What we increasingly witness is not Schumpeterian innovation but innovation in packaging and marketing—while core services remain routine, predictable, and often unhelpfully extractive.
Consider the modern fixation on credit cards. Banks run loud campaigns: “Spend RO 50 or RO 100 and earn cash back!” — while the same institutions invest heavily in promoting a cashless society. The contradiction is obvious. On one hand, eliminate cash; on the other, reward customers with cash returns.
This is not innovation for development; it is innovation for consumption — often at the expense of household financial discipline.
Economically, this marks a shift from productive finance to consumption-driven finance. When banks prioritise personal loans, salary-linked loans, credit card debt, and short-term profit-making products over long-term investment financing, they weaken the foundations of real economic growth.
Instead of channelling funds into industries, agriculture, technology, or entrepreneurship, the sector increasingly channels money into personal consumption — a trend that mirrors Hyman Minsky’s theory of financial capitalism, where institutions evolve from supporting production to fuelling speculation and consumer debt.
Another worrying trend is the way banks have expanded into lifestyle businesses far beyond their mandate. Why are banks booking hotels, arranging airline tickets, renting cars, and offering endless lifestyle discounts, as though they are travel agencies?
These activities add little to financial intermediation or macroeconomic stability. They signal a drift into convenience capitalism, where customer engagement is measured through perks rather than meaningful financial solutions.
Instead of financing startups, enabling green projects, or supporting industrial expansion, some banks invest in mobile apps that help customers locate discounted coffee.
Where, then, is the creativity our economy truly needs?
Real banking innovation is not a glossy credit card or a cashback banner. It is not a hotel booking tab hidden inside a banking app.
Real innovation lies in financing SMEs, supporting digital entrepreneurship, enhancing financial inclusion, building long-term investment funds, and adopting technologies that reduce costs and increase transparency. It lies in offering products that help society create value — not merely consume it.
The history of banking stretches back thousands of years — to the temples of Mesopotamia and the merchants of ancient Greece. The core idea has remained the same: accept deposits and extend loans. Yet today, this simplicity has been obscured by a maze of products that often confuse customers more than they help them.
Instead of becoming drivers of development, many banks have become sellers of debt. Instead of enabling innovation, they’ve turned innovation into a marketing slogan.
As I left the library and returned to my design thinking workshop, one question lingered:
Has the banking sector forgotten that real growth comes not from promoting spending, but from promoting value creation?
Mohammed Anwar Al Balushi
The writer is a Economics Lecturer, UTAS, College of Economics and Business Administration
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