It helps the wheel of commerce to turn. Every institution that makes loans is operating on the basis of fractional reserves, even if putatively its reserves are 100 percent. Any distinction between banks and bank-like financial institutions is purely artificial. Even a pawn shop falls within this category. In effect the pawnshop owner has only one depositor, himself, from whose deposits he makes loans.
Loans increase effective demand.
The repayment of loans decrease effective demand. Loans increase the rate of spending. The repayment of loans decrease the rate of spending. The pawnshop owner does not do it alone, of course. Neither does an ordinary commercial bank.