New outlook on loans and debt?

In the medieval era, banks routinely lent vast sums to lords and nobles to finance wars. These loans effectively created money, with the expectation of repayment plus interest. But often, those debts were never repaid. When defaults occurred, much of this quasi-created money vanished from the financial ledgers, but not before it had already done something very real.

The borrowed funds had fed armies, forged weapons, paid armorers and mercenaries, and fueled the machinery of espionage and logistics. In other words, even loans that were destined to default gave rise to a functioning war economy. The money might have disappeared on paper, but its material effects lingered in the form of castles built, enemies defeated, and power consolidated.

So here’s the thought: what if we applied that same mentality, of lending large sums with an understanding that some won’t be repaid, not to war, but to financial suffering? If money can be created and spent with no guaranteed return, yet still reshape the world, could we not do the same to reduce economic inequality? Or is the mechanism of how money is used not suitable for this? Thoughts

P.S: I should admit that I don't know much about theories surrounding money as a concept so maybe the question might come off a bit naive but I am wondering genuinely why it's not possible.