We used to have similar things but it was never the 100% of the salary. It was like 25% of everyone's salary pooled and 1 member got it mostly through common decision or lottery. When a member claimed they have the need and other members agree on it, he/she got the first priority. When there are multiple people demanding it, they would go through a lottery. At the end everyone would get their money back some sooner while some later.
What is this thing called in your country? Contribution or salary lottery? I've also heard cases when it wasn't 100% of the salary, that's mostly done in those who are above 30-40 and have to take care of families but mostly it's 100%, especially among young people, because when they work, their parents still give them some money and their job is only an extra source of income for them to spend money in whatever they wish.
I've also heard cases when someone needed money the most and they were demanded first by the decision of other co-workers. I wonder where you are from.
But this is completely stopped now and is replaced by something more like a bank. Even today a portion of the salary is pooled, there is a minimum and maximum you could put to the pool and employee could decide the amount. The members could ask for loans which are provided at a fixed interest rate. 12% in our case. The amount they can demand is also not unlimited, all they can ask for is 200% of their savings+2 months salary.
The interest collected is also pooled and at the end of the year, the interest is distributed according to contribution. There are no fixed returns but it ranges 5-10%, which are better than what banks provide. The interest on loans are higher than bank but there's no paperwork and need to put collateral so there's always not enough liquidity to loan. The getting of interest is also secured as no one is allowed to transfer out without paying their due and our office could held back amounts even if people retire.
Do you mean that employees collect money for co-workers and this co-worker pays them back at an interest rate? Is it okay in your country to ask for an interest rate to a co-worker? In my country, you can't do that.