The Fund was originally established to provide financial and technical assistance to Arab countries. In 1974, the scope was extended to the rest of the developing world and the capital was increased to KD 1,000 million. In 1981, the capital was further increased to KD 2,000 million and the Fund's charter was amended to allow it to participate in the capital of other development institutions and corporate entities of a developmental nature.

The Fund achieves its objectives by making loans, extending grants, and contributing to the capital of development institutions. There are no sectorial limitations restricting its activities and the assistance is generally provided for specific projects undertaken by a wide range of entities, including central governments, public utilities, development institutions and mixed enterprises.

The Fund has administrative and financial independence, operating under the overall supervision of the Ministry of Finance.