The real reason is that giving a grade promotion to a young child every few weeks keeps them entertained and happy, which keeps their parents happy and therefor

The real reason is that giving a grade promotion to a young child every few weeks keeps them entertained and happy, which keeps their parents happy and therefore ensures that tuition money keeps coming in and new students continue to sign up. The integrity of the art is almost entirely irrelevant to most of these McDojo-style martial arts schools.