Islamic Law of Transaction: How Can a Non-Binding Simple Loan Create Ownership of Usufruct?

The key is to separate two different questions:

1. Does the borrower presently own the usufruct?
2. Is that ownership guaranteed to continue for the whole stated period?

Under the Hanafi and Maliki view, the answer can be:

Yes, the borrower presently owns the usufruct — but that ownership is revocable because the simple loan is non-binding.

That is not a contradiction.

1. “Ownership” Does Not Always Mean Permanent Ownership

When we say the borrower owns the usufruct, we do not mean that he owns it permanently or that the lender can never take it back.

It means:

While the simple loan continues, the borrower has a legally recognized right over the benefit of the property.

Example

Ali lends Ahmad a bicycle for one week.

Under the Hanafi and Maliki approach:

Ali → owns the bicycle itself

Ahmad → owns the usufruct of riding it

But because the simple loan is non-binding, Ali may recall the bicycle before the week ends.

So Ahmad’s usufruct exists:

while the loan remains in force.

2. What Does “Non-Binding” Mean?

A non-binding contract means that one or both parties may terminate the contract without having to wait until the originally expected period ends.

In a simple loan:

The lender may normally ask for his property back.

Example

Ali says:

“You may borrow my bicycle for one month.”

Ten days later, Ali needs it back.

Because the simple loan is non-binding, Ali may recall it.

When the loan ends:

Ahmad’s usufruct ends

↓

Ali again has the physical asset + its full benefit

3. So Ahmad Really Had Usufruct — It Was Just Revocable

This is the most important point.

Before Ali recalls the bicycle, Ahmad is not merely holding it.

He is legally entitled to:

ride and benefit from it.

Therefore:

Usufruct exists ✅

But:

It can be terminated by the lender ✅

So the correct description is:

Revocable ownership of usufruct

rather than:

Permanent or guaranteed ownership of usufruct

4. Non-Binding Does Not Mean “No Legal Right”

This is where the confusion comes from.

Non-binding does not mean:

“The borrower has no legal right.”

It means:

“The legal right exists, but the contract creating it can be terminated.”

Example

Ali lends Ahmad a house.

While the loan continues:

Ahmad may lawfully live there.

A stranger cannot simply remove Ahmad and say:

“You have no rights because this is only a simple loan.”

Ahmad does have a right of use.

However, Ali—the person who created that right—may normally terminate the simple loan and demand the property back.

5. Think of It as Two Layers

Layer 1 — What Right Does the Contract Create?

Simple loan creates:

usufruct without payment

under the Hanafi and Maliki view.

Layer 2 — How Secure Is That Right?

The simple loan is:

non-binding / revocable

Therefore, the usufruct can end when the lender validly recalls the property.

So:

Ownership of usufruct

does not automatically mean:

irrevocable ownership of usufruct

6. Why Is a Lease Different?

A lease (ijarah) also gives ownership of usufruct.

But unlike the simple loan:

Simple loan

Usufruct without payment

• ●

non-binding

Lease

Usufruct for payment

• ●

binding

Example

Ali lends Ahmad a house free for one year.

Ali may normally recall it because the arrangement is a simple loan.

But if Ali rents the house to Ahmad for one year under a valid lease, Ali normally cannot simply say after one month:

“I changed my mind. Leave.”

Ahmad has paid for a binding one-year usufruct.

7. This Explains Why the Borrower Cannot Lease the Borrowed Property

Now the earlier rule makes more sense.

Suppose:

Ali lends car to Ahmad

↓

Ahmad’s usufruct is based on a:

non-binding simple loan

If Ahmad then rents the car to Yusuf:

Ahmad tries to create a binding lease for Yusuf

That creates a problem.

Ahmad’s own right can disappear whenever Ali validly recalls the car.

How can Ahmad give Yusuf a stronger right than Ahmad himself has?

Therefore:

A weaker, revocable contract cannot normally be used as the basis for a stronger, binding contract.

8. But Why Can Ahmad Re-Lend It?

Under the Hanafi and Maliki view, Ahmad may generally re-lend the property because the second simple loan is also:

non-binding

So the strength of the second right does not exceed the first.

Example

Ali → lends bicycle to Ahmad

↓

Ahmad → re-lends bicycle to Yusuf

Both arrangements are simple loans.

So:

First contract = non-binding

Second contract = non-binding

There is no attempt to create a stronger legal right.

9. Compare Re-Lending and Leasing

Re-Lending

Ahmad received:

revocable usufruct

and gives Yusuf:

revocable use/usufruct

This can fit within Ahmad’s right.

Leasing

Ahmad received:

revocable usufruct

but tries to give Yusuf:

binding paid usufruct

That is stronger than Ahmad’s own legal position.

Therefore, it is not allowed under the rule you are studying.

10. Example With a House

Ali tells Ahmad:

“You may stay in my house for six months for free.”

Under the Hanafi/Maliki view:

Ali → owns house

Ahmad → owns its residential usufruct

But the contract is non-binding.

After two months Ali says:

“I need my house back.”

The simple loan ends.

Therefore:

Ahmad’s usufruct ends

This does not mean Ahmad never owned usufruct.

It simply means:

His ownership of the usufruct depended on the continued existence of the simple-loan contract.

11. Ownership Can Be Limited in Different Ways

This also connects to the wider topic of ownership.

Not every ownership interest has the same strength.

Ownership may be:

• complete or partial,
• permanent or temporary,
• binding or revocable,
• restricted or unrestricted.

So merely saying:

“This is ownership”

does not tell us:

how long it lasts or how easily it can end.

In the case of a simple loan:

Type of right → ownership of usufruct

Strength of contract → revocable/non-binding

12. The Best Way to Remember It

Do not think:

Ownership = must be permanent and impossible to cancel.

Instead think:

Ownership tells us what legal interest the person presently has.

while:

Binding or non-binding tells us how secure that legal interest is against termination.

Therefore:

Simple Loan

What does borrower have?

→ Usufruct

How secure is it?

→ Revocable / non-binding

Lease

What does lessee have?

→ Usufruct

How secure is it?

→ Binding for the agreed period

13. One-Sentence Rule

Under the Hanafi and Maliki view, a simple loan gives the borrower present ownership of the usufruct, but because the loan is non-binding, that usufruct is revocable and ends when the lender validly recalls the property.

Easiest memory formula

Simple loan = ownership of usufruct + free + revocable

Lease = ownership of usufruct + paid + binding