Islamic Law of Transaction: Simple Loans and Ownership of Usufruct

1. What Is a Simple Loan?

A simple loan (‘āriyah) is when the owner allows another person to use an item without payment, while ownership of the physical item remains with the owner.

Example

Ali owns a bicycle.

He tells Ahmad:

“You may use my bicycle for one week for free.”

So:

Ali → owns the bicycle

Ahmad → receives the right to use it

No rent is paid.

2. Hanafi and Maliki View

The Hanafi and Maliki schools ruled that a simple loan gives the borrower:

ownership of the usufruct without payment.

Usufruct

Usufruct (manfa‘ah) means the legal right to use and benefit from property.

So under this view:

Physical item → remains owned by lender

Usufruct → belongs temporarily to borrower

Example

Ali lends his bicycle to Ahmad.

Under the Hanafi and Maliki view:

Ali → owns bicycle

Ahmad → owns the temporary benefit of riding it

So Ahmad has more than mere physical possession.

He has a legal right to the benefit.

3. What Can the Borrower Do Under the Hanafi and Maliki View?

Because the borrower owns the usufruct, he may normally:

1. Use the item himself

OR

2. Re-lend it to another person

subject to any restrictions, harm, custom, or conditions.

4. Example: Borrower Uses It Himself

Ali lends Ahmad a bicycle for one week.

Ahmad rides the bicycle himself.

This is allowed because:

Ahmad owns the usufruct for the period of the loan

So:

Simple loan

↓

usufruct transferred without payment

↓

borrower may personally use it

5. Example: Re-Lending

Ali lends Ahmad a bicycle.

Ahmad then allows Yusuf to use the bicycle.

Under the Hanafi and Maliki approach described in the passage, this can be allowed because Ahmad owns the usufruct.

So:

Ali → owns bicycle

Ahmad → owns usufruct

↓

Ahmad re-lends use to Yusuf

This is possible because Ahmad has control over the benefit.

6. But the Borrower Cannot Lease It

The Hanafi and Maliki jurists did not allow the borrower to rent out the borrowed item for money.

Example

Ali lends his car to Ahmad for free.

Ahmad cannot normally say:

“I will now rent Ali’s car to Yusuf for RM500.”

Why?

Because Ahmad received the benefit through a simple loan, not through a lease.

7. Why Can He Re-Lend but Not Lease?

This is the important part.

A simple loan is:

Non-binding

This means the lender can usually ask for the property back at any time.

A lease is:

Binding

This means the tenant normally has a stronger contractual right for the agreed lease period.

Therefore:

A weaker contract should not be used to create a stronger contract.

8. Example of the Problem

Ali lends his car to Ahmad for one month.

Because it is a simple loan, Ali may say after five days:

“Please return my car.”

Now imagine Ahmad had rented the car to Yusuf for one month.

Yusuf might say:

“I have a binding one-month lease.”

This creates a problem.

Ahmad received only a weaker, revocable right from Ali.

But Ahmad tried to give Yusuf a stronger, binding right.

So:

Simple loan = weaker and non-binding

↓

cannot normally become the basis of

↓

lease = stronger and binding

9. Another Reason: Harm to the Owner

The passage also explains that leasing a borrowed item may harm the original owner.

Example

Ali lends Ahmad his car for personal use.

Ahmad rents it to many different people for profit.

This may:

• increase wear and tear,
• expose the car to greater risk,
• use the property beyond what Ali expected.

Therefore, the Hanafi and Maliki jurists did not allow the borrower to lease the borrowed item.

10. Shafi‘i and Hanbali View

The Shafi‘i and Hanbali schools understood simple loans differently.

They defined a simple loan as:

permission to use the property without payment.

This means they did not treat the borrower as owning the usufruct in the same way as the Hanafi and Maliki schools.

Instead:

Owner keeps ownership

↓

borrower receives personal permission to use

11. Example Under the Shafi‘i and Hanbali View

Ali tells Ahmad:

“You may use my bicycle for one week.”

According to the Shafi‘i and Hanbali approach:

Ali → owns bicycle and its benefit

Ahmad → receives permission to use it

Ahmad’s right is therefore more personal.

12. Can the Borrower Re-Lend Under the Shafi‘i and Hanbali View?

No.

Because Ahmad was given:

personal permission to use

not:

ownership of the usufruct

So Ahmad cannot automatically transfer that permission to Yusuf.

Example

Ali tells Ahmad:

“You may use my car.”

Ahmad cannot simply tell Yusuf:

“You use it instead.”

Why?

Because the permission was given to Ahmad.

Ahmad does not own the benefit in a way that allows him to transfer it.

13. This Shows the Difference Between Usufruct and Mere Permission

This passage gives a very clear madhhab difference.

Hanafi and Maliki

Simple loan gives:

ownership of usufruct

Therefore the borrower may normally:

• use the benefit himself,
• re-lend the item,

but may not lease it.

Shafi‘i and Hanbali

Simple loan gives:

unpaid permission to use

Therefore the borrower may:

• personally use the item,

but may not re-lend it to another person.

14. Why Is This Important?

Because the same transaction — a simple loan — is understood differently by the schools.

The question is:

What exactly did the borrower receive?

Hanafi and Maliki answer:

A temporary ownership of usufruct

Shafi‘i and Hanbali answer:

A personal permission to use

That difference affects what the borrower can do next.

15. One Complete Example

Ali lends his car to Ahmad for free.

Under Hanafi and Maliki

Ahmad receives:

ownership of the car’s usufruct

Therefore Ahmad may:

drive it himself ✅

and may generally:

re-lend it to Yusuf ✅

But Ahmad may not:

rent it to Yusuf for money ❌

because a non-binding loan cannot normally be turned into a stronger binding lease.

Under Shafi‘i and Hanbali

Ahmad receives:

personal permission to use the car

Therefore Ahmad may:

drive it himself ✅

But he may not:

re-lend it to Yusuf ❌

because the permission was given specifically to Ahmad.

16. What About Mere Possession?

A simple loan is not merely possession.

The borrower usually has physical possession, but the schools disagree about the legal right attached to that possession.

Hanafi and Maliki

Possession + ownership of usufruct

Shafi‘i and Hanbali

Possession + personal permission to use

So:

Mere possession alone is still different from a simple loan.

Example

Ali gives his car to Ahmad only for safekeeping.

Ahmad has:

possession

but no right to personally drive it.

That is mere possession.

17. Easy Way to Separate the Three Ideas

Mere Possession

“I physically hold the item, but I have no right to use it for myself.”

Example:

A mechanic holding a car for repairs.

Permission to Use

“The owner allows me personally to use it.”

This is the Shafi‘i and Hanbali description of a simple loan.

Ownership of Usufruct

“I legally own the temporary benefit of the item.”

This is the Hanafi and Maliki description of a simple loan.

18. Direct Questions and Answers

Question 1: What do the Hanafis and Malikis say about simple loans?

Answer:

They say a simple loan gives the borrower ownership of the usufruct without payment.

Question 2: Can the borrower use the item himself?

Answer: Yes.

He may personally enjoy the benefit.

Question 3: Can he re-lend it?

Answer:

Under the Hanafi and Maliki view, generally yes, subject to restrictions and harm.

Question 4: Can he lease it for money?

Answer: No.

Because the simple loan is non-binding while a lease is binding.

A weaker contract should not be used to create a stronger one.

Question 5: Why else is leasing prohibited?

Answer:

Because renting out the borrowed item may expose the original owner’s property to harm or greater use than expected.

Question 6: What do the Shafi‘is and Hanbalis say?

Answer:

They say a simple loan is merely an unpaid permission to use the property.

Question 7: Can the borrower re-lend it under the Shafi‘i and Hanbali view?

Answer: No.

Because the borrower received personal permission, not ownership of the usufruct.

Question 8: Is a simple loan merely possession?

Answer: No.

The borrower has a right to use the item.

Under Hanafi and Maliki law, that right is treated as ownership of usufruct.

Under Shafi‘i and Hanbali law, it is treated as personal permission to use.

19. Final Flow

SIMPLE LOAN — ‘ĀRIYAH

↓

Hanafi + Maliki

Free transfer of usufruct

↓

Borrower may:

use personally

or

re-lend

↓

But may not:

lease for money

Shafi‘i + Hanbali

Free permission to use

↓

Borrower may:

use personally

↓

But may not:

re-lend

20. One-Sentence Rule to Memorize

The Hanafis and Malikis treat a simple loan as giving the borrower ownership of usufruct without payment, while the Shafi‘is and Hanbalis treat it as personal permission to use; this is why the first group generally allows re-lending, while the second does not.

The most important shortcut is: Hanafi/Maliki = usufruct ownership; Shafi‘i/Hanbali = permission to use.