In 1996, a first funding mechanism was created in SAARC, ‘South Asian Development Fund (SADF), merging the SAARC Fund for Regional Projects (SFRP) and the SAARC Regional Fund. SADF objectives were to support industrial development, poverty alleviation, protection of environment, institutional/human resource development and promotion of social and infrastructure development projects in the SAARC region.
A primary reason for establishing SDF was that the existing South Asian Development Fund (SADF) was found to be inadequate i.e. in terms of required quantum of funds and its limited scope of work. In order to avoid proliferation of funds, the SAARC Financial Experts (September 2005) looked at the entire gamut of issues relating to funding of SAARC projects and programmes; and, amongst others, agreed that in lieu of proliferating sectorial financing mechanisms, the SADF be reconstituted into the SAARC Development Fund (SDF).
The Thirteenth SAARC Summit (Dhaka, 12-13 November 2005) finally decided to reconstitute the SADF into SAARC Development Fund to serve as the “umbrella financial mechanism” for all SAARC projects and programmes.
SAARC Development Fund
The SAARC Development Fund was established and inaugurated on 28th April, 2010 by the Heads of States/Governments during the Sixteenth SAARC Summit held in Thimphu Bhutan. The Fund serves as the umbrella financial institution for SAARC projects and programs, which are in fulfilment of the objectives of the SAARC Charter. It is aimed to contribute to regional cooperation and integration through project collaboration.
The primary objective of SDF is to:
promote the welfare of the people of SAARC region,
improve their quality of life, and
Accelerate economic growth, social progress and poverty alleviation in the region.
To support these objectives, SDF has mandate to identify the projects, finance projects, mobilize funds, provide financing and technical assistance including managing of the Fund.
SDF has three funding windows: namely, Social Window, Economic Window and Infrastructure Window.
The Social Window primarily funds projects on poverty alleviation, social development focusing on education; health; human resources development; support to vulnerable/disadvantaged segments of the society; funding needs of communities, micro-enterprises, and rural infrastructure development.
The Economic Window extends funding to non-infrastructural projects related to trade and industrial development, agriculture, service sector, science and technology and other non-infrastructure areas. Under the Economic Window, SDF proposes to fund Micro, Small and Medium Enterprises (MSME) program in SAARC Member States. MSME funding scheme within the Economic Window of SDF. The MSME Funding Scheme of SDF has recently been approved in the 30th SDF Board meeting
The Infrastructure Window is primarily utilized to fund projects in areas such as energy, power, transportation, telecommunications, environment, tourism and other infrastructure areas.
Current Status of SDF
Currently, SDF is implementing over 90 projects in all SAARC Member States. There are 87 projects (under 13 areas) across all SAARC Member States under the Social Window with fund commitment of USD 75.23 million. USD 48.21 million have been disbursed. There are five projects under the Economic and Infrastructure windows (including 2 in-principle approved projects) with a fund commitment of USD 73 million and MSME Program with fund allocation of USD 50 million in SAARC Member States. We have disbursed USD 13 million under Economic Window for financing of ATR aircraft for Drukair Corporation, Bhutan
The cumulative fund commitment under the three funding windows including MSME Program stands allocation is at USD 198.23 million. Further, more than 10 bankable projects are also under active consideration of SDF to co-finance in SAARC Member States
Partnership – Building Strategic Alliances
SDF has established and strengthened relationship with various partners to co-finance the cross border projects through the Memorandum of Understanding. SDF has developed a working relationship with various Multinational Development Banks, International Financial Institutions, Regional banks, MSME Banks, SME Banks, Chamber of Commerce and Industries, Trade and Investment Promotion Agencies.