SDF was founded in 2010 by the member countries of the South Asian Association for Regional Cooperation (SAARC), an intergovernmental organization comprising eight countries in South Asia, namely Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.

[1] It carries out and manages various projects and programs across three key areas: Social, Economic, and Infrastructure.

[4][5] SADF commenced operations on June 16-17, 1996, with an initial resource pool of approximately US$6.4 million.

Nevertheless, after determining that the existing mechanism was not satisfactory, the First Meeting of Financial Experts was held in September 2005 during the Thirteenth SAARC Summit in Dhaka.

In line with this development, a permanent Secretariat for the SDF was inaugurated in Thimphu on April 28, 2010, coinciding with the Sixteenth SAARC Summit.