CDF was established in mid-1999 by the Tanzania Cotton Board [TCB] to involve stakeholders in initiatives to restore order in the industry following emergence of a host of problems which were caused by the 1990s liberalization of agricultural markets and government withdrawal from direct involvement in production and trading.

Major functions of the Fund are to oversee cotton development. The Cotton Act. No. 2 of 2001 specifies the functions of the Fund as to:-
(a) Facilitate the importation and efficient distribution of inputs;

(b) Ensure steady flow of financial resources to the FUND

(c) Strengthen cooperation and collaboration among cotton stakeholders to boost the position of the industry in the country.

(d) Support cotton value addition initiatives at farmer level.

(e) Finance or support cotton related extension services so as to enhance the capacity of farmers to improve quantity and quality.

(f) Fund and monitor cotton research and development at Ukiriguru and Ilonga.

(g) initiate projects aimed at promoting better cotton growing practices;

(h) fund training and other human resources development initiatives;

(i) invest funds for developing of the cotton industry for the benefit of stakeholders;

(j) acquire fixed assets necessary for attainment of the above objectives;

(k) Provide a forum for cooperation with local and international organization with similar objectives.