In 1996, the first funding mechanism was created in SAARC - the ‘South Asian Development Fund (SADF), merging the SAARC Fund for Regional Projects (SFRP) and the SAARC Regional Fund. SADF's 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 the SAARC Development Fund 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. The SAARC Financial Experts in September 2005 looked at the entire gamut of issues relating to funding of SAARC projects and programmes and agreed that in lieu of proliferating sectorial financing mechanisms, the SADF be reconstituted as the SAARC Development Fund (SDF).
The Thirteenth SAARC Summit (Dhaka, Bangladesh 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 Secretariat was established and inaugurated on 28 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 towards 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's mandate is to identify regional projects, finance projects, mobilize funds, provide financing and technical assistance including managing of the Fund.
SDF has three funding windows: 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 has over 95 Board-approved projects in all the SAARC Member States. There are 95 projects (under 15 areas) approved under the Social Window with a total fund commitment of USD 91.58 million. Of this, over USD 53 million have already been disbursed. Under the Economic and Infrastructure windows, the fund commitment is USD 43 million under which, SDF has already disbursed USD 13 million under Economic Window for financing of ATR aircraft for Drukair Corporation, Bhutan. The cumulative fund committed for projects under the three funding windows is around USD 134.58 million.
Governing Structure of SDF
SDF is governed by the Governing Council that comprises the Finance Ministers of the SAARC Member States. The Board of Directors of SDF comprises of senior officials representing Finance Ministries of the Member States, Secretary General of SAARC Secretariat and Chief Executive Officer, SDF.
Partnership – Building Strategic Alliances
Building partnership is key for this region to realize its full potential. Therefore, SDF has established and strengthened its relationship with partners to co-finance the cross border regional projects. SDF has developed a solid working relationship with various Multinational Development Banks, International Organizations, Financial Institutions, Regional banks, MSME Banks, SME Banks, Chamber of Commerce and Industries, Trade and Investment Promotion Agencies.