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Well, certainly not everyone who askes me to borrow a couple hundred dollars fits into that category....

It's an efficient and polite way of determining if your "loan" actually helps them, or they are going to be a bottomless pit of misery and $ requests. If the loan helps them, they will be able to pay it back and all will be well. If it doesn't help them, then there's likely no value in giving them more money.

If you want be charitable, there's certainly more efficient ways than giving free money to random people who ask you.

It's super inefficient, and it's absolutely not polite.

You loan someone money not expecting them to pay it back, you never bring it up or bother them, they decide to leave your life forever. You are the bad guy. Only on the internet.

No... if you have some messed up system that involved that process to filter people from your life, you're the bad guy, yeah. Not just on the internet, either.

It's not a "system" that anyone designed. It's an emergent property of helping people who ask for it.