Suppose you prohibit "usury", in the sense that the interest rate must be zero.
If the return on lending is zero, no one would lend in a capitalist system. You are deprived of the capital while someone else is using it, and afterwards, you get exactly the same amount of money (or, in less draconian systems, you'd get a "minimal" interest rate that made you indifferent between the safest asset available, like a treasury bond). So in the time you lent out your capital, you were deprived of using it for your own purposes, and someone else benefited.
So in such a system, what happens? Loans are no longer purely a financial instrument, but become non-pecuniary as well. I lent you money to start a business, so you have to, say, marry your beautiful daughter to my idiot son, etc. Financial markets vanish, but networks of overlapping obligations replace them. You destroy markets that create securities as commodities in favor of a primitive system of trading favors.
What happens then? Black markets for liquidity. Loan sharks, the mob, and so on. If I can't get a mortgage from a conventional bank, I go to the guy with cash who is willing to break the law. You force many people into financial dependence on systems outside government oversight, because they are doing something illegal.
Would this help a developing country? Definitely not. Many already struggle under this kind of system, and killing off markets for loans would be a disaster.
Accountability is at the heart of well-functioning markets. The problem with the western system is that large players --- say, airlines --- know that in a crisis, the government will step in and save them, so they take inappropriate risks and fail to plan for bad outcomes. This has nothing to do with charging interest.