If your instructors don't let people test until they're ready, than why even test them in the first place? If your instructors know that a student is ready than they can promote them right then and there and a test wouldn't be necessary.
We test them for a number of reasons.
The "test" gives them a chance to show off for family and friends.
The "test" lets them show the other students (who, especially at lower ranks, are focused on their OWN performance) their progress.
The "test" puts them in front of the group, which puts a new and different level of stress on the student.
Testing is fun.
I bet you can think of a few other obvious reasons on your own...