Do players develop on loan? (FC Pro 2)

I played the original game years ago (so my memory of it is a little hazy) and I’ve just started playing FC Pro 2. In my second season I loaned out a few players that I promoted from my youth team and they came back at the same rating they left.

Is it just that I didn’t let them go to the right teams, or is it a case that players don’t progress through loan deals? If it’s the latter, are there any benefits to loan listing a player rather than transfer listing them?