system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Why are banks allowed to use money in way they cannot give people their own money back?
gpt
Consider a small village with one bank and no outside help. An individual wants to build a factory. So he takes out a loan. 
In future this factory happens to be very successful thereby creating lot of growth. 

However to begin with the loan money has to come from somewhere? The idea is banks which collect small to large savings from the villagers can afford to loan a part of their savings. This is based on the statistical assumption that normally everyone wouldn't take out their money simultaneously. So the bank can invest a % of the money it has. 
The bank makes money by fee and loan interests. The villagers get safety and sometimes interest on their savings. The economy grows as a whole. 

The problem is during unstable times, wars,  recession, rumors suddenly a lot of people start taking out their money (this is called a run on the bank). This violates the underlying statistical model. 

On a personal level saving money is a good habit. On a collective level just plain savings isn't good because there is no economic growth. Banks ideally  transform the personal savings of a society into engine of economic growth.