The early concept of establishing an actually inclusive and wide-ranging financial institution was envisaged by Rural Self-reliance Development Centre (RSDC) a NGO, working to materialize 'self-reliant' and 'self-dependant' society. Rural Self-reliance Development Centre (RSDC) had already established and promoted 171 cooperatives (known as Swawalamban Sahakari) in 12 districts, with strong belief that local financial demands can be fulfilled and economic activities stimulated by consolidating local institutions (mainly cooperatives). As anticipated, Rural Self-reliance Development Centre, succeeded to fulfill local financial demands and stimulate economic activities to some extent, but shortly, those cooperatives turned to be unable to provide the required financial support to rural people, because of the lack of the sufficient fund. In rural cooperatives, demand for loan was very high in comparison to their deposit collecting capability. Rural Self-reliance Development Centre began to think about an institution that can provide financial support to the cooperatives (mainly Swawalamban Sahkari) operating in rural areas, and this was the very first prototype of RSDC Laghubitta Bittiya Sanstha Ltd. (RSDCMF).

Rural Self-reliance Development Centre (RSDC) had already established and promoted 171 cooperatives (known as Swawalamban Sahakari) in 12 districts

For various reasons, Rural Self-reliance Development Centre (RSDC) first planned to incorporate a financial institution, whose promoters were to be RSDC itself and Swawalamban Sahakari along with other individuals. But because of some legal provisions, Swawalamban Sahakari (or any other cooperatives) were not eligible to incorporate a financial institution. Later, Rural Self-reliance Development Centre (RSDC), then Lumbini Bank Ltd. (Now Bank of Kathmandu Ltd.) and 172 individuals from 40 districts joined together to materialize the idea of incorporating a "D" class financial institution, at present known as RSDC Laghubitta Bittiya Sanstha Ltd.

Before the establishment of RSDCMF, there were some wholesale lending organizations in Nepal, but their activity were mainly limited to the urban and semi-urban areas, and cooperatives and MFIs operating in core rural areas were either deprived of, or had very limited access to formal financial sector. Hence, RSSDCMF has been set up with the purpose of mainly providing wholesale lending in remote and rural areas with limited access to formal financial sector, and urban and semi-urban areas as well.