It’s really a macrocosm of socialist failure. Left to its own devices, private enterprise would loan money to individuals most likely to repay it, at interest rates commensurate with the amount of risk involved in the loan.
But government didn’t care for that system, and substituted one in which the criteria for loans was not based on ability to repay, but on a political calculus that favored groups identified as potential sources of political support. Many of these borrowers would not have gotten loans under the previous regime, for the very good reason that they were bad risks.
Nature and economics do not long tolerate fools. Of course the loans went bad. And the consequences have been severe.
This is typical of what happens when economic decisions are politicized.