Generally you would loan someone money without interest because the result would be mutually beneficial. We already do this in smaller social circles like our families, and then our close friends. The problem is that most lenders arent local and dont live in the community. They have no shared interest with the borrower.

In some cases communities do come together and raise funds interest free, and use them for something that benefits society in some way, we just wouldnt describe it that way normally.

Without interest, why would anyone lend a random stranger some money? Interest is basically the only things that props up an unsecured loan.

believe it or not, it's very common.