I don't see why this is a blanket terrible idea - a ban on loans with interest, which are the only sort of loans that are economically rational for the lender, is a moral principle of one of the world's most popular religions (Islam) and used to be a moral principle of another (Christianity) until it was corrupted by capitalism in its lands. So we must at least concede that the idea of a world where loans are forbidden is well within the Overton window.

A world where people don't need loans seems like a pretty good world, honestly. I've been fortunate enough that my parents were able to finance my college education out of their savings, and I rent my apartment because I don't want a big mortgage, and my life is I think better compared to people I know with student loans and mortgages. A world where everyone has the same access to resources that I had is a worthy goal, and if we can fund that by banning loans, seems fine.

No, you can still make a loan by buying a bond etc.

I simply feel banks have conflicting goals as they need to be 'good at' customer service and making loans. This creates a lot of poor incentives and economic distortions.