That functionality is enabled for about 1 in 20 titles in my collection, and sufficiently well hidden that I can't imagine most people know it exists.
E-book publishers don't see the value in lending. Look at how they are clamping down on the number of copies available to libraries. To them, every loaned book is a lost sale.
I agree it's not widely used and not known about. What surprised me is that I know older family members, who are otherwise fairly technically illiterate, who actively share ebooks using their Kindles. Another older family member, where their local library is very hands on with helping them. They both know way more than I know about what's possible and how to do it.
Another, I believe separate program, is family sharing (it's not a loan you can both read it simultaneously). I'm not sure if that's a separate privilege the publishers must opt-into, but I have used it the one time I tried.
E-book publishers don't see the value in lending. Look at how they are clamping down on the number of copies available to libraries. To them, every loaned book is a lost sale.