India and Africa share deep historical and cultural bonds, tied together with centuries of trade and a large Indian diaspora across the African continent. 

In recent times, their bond is increasingly becoming an economic one as well. 

The United States (U.S.) has recently imposed a 25% tariff on India, with the country’s trade policies disrupting global supply chains and intensifying global economic uncertainty. In this period of turbulence, Africa is emerging as a key partner for India: rich in resources, situated in a strategic location, and bolstered by a large working-age population.

Banks are well-positioned to catalyse trade and investment between India and Africa, especially as the macroeconomic environment is likely to remain uncertain. Through trade finance, project funding, and innovative cross-border payments systems, banks can smooth out trade flows and unlock new opportunities for mutual benefit.

Cementing ties across key sectors

Bilateral trade between India and Africa has surged from £51 billion in 2011-12 to £62.1 billion in 2023-24 – making India Africa’s third-largest trading partner. This trade is broadening across multiple industries, but several strategic sectors offer particularly fertile ground for Indian investors, such as infrastructure, energy, agriculture, and telecommunications. 

Nearly two-thirds of the world’s uncultivated arable land is African, and Indian investment in food processing and agri-tech is already helping to boost yields and strengthen food security for both regions.

Critical minerals – especially as a means to power the global green energy transition – are also one of the most strategically important opportunities for Indian investors. Africa holds roughly 30 per cent of the world’s mineral reserves and is rich in natural resources such as lithium, graphite, uranium, and cobalt. This abundance of critical minerals is vital for renewable energy and battery production, placing Africa at the centre of the green energy transition.

Prime Minister Narendra Modi recently visited Namibia as part of a five-nation tour across Africa, and discussed the need to deepen the strategic ties between the two regions on critical minerals, technology, and trade. By securing reliable access to these resources, India can future-proof its green transition, while African nations can attract international investment to develop local beneficiation industries, rather than just exporting raw materials.

The systemic barriers to trade

However, these opportunities cannot be harnessed without addressing the challenges that come with cross-border trade. Tariffs, currency volatility, and the fragmented regulatory environment across 54 countries continue to raise barriers; banks often encounter difficulties in moving money between markets, with liquidity challenges in hard currency adding further complexity. 

A lack of coordination between regulators across jurisdictions can also hamper financial flows and raise the cost of doing business. Unless these barriers are addressed, investment will continue to lag behind potential.

The continent’s reliance on exporting raw materials is another core challenge. African resources are often shipped abroad, only to be returned as finished products; a cycle that leaves local economies unable to capture the full benefit of their assets. By financing local processing plants, Indian investors can help African nations capture more of the value chain, while reducing systemic risks from overreliance on external suppliers.

Deepening collaboration between Indian and African banks

As the investment relationship between India and Africa continues to blossom, banks can act as a bridge, helping Indian investors navigate these local markets, structuring financing for critical mineral projects, and ensuring trade flows run smoothly across borders.

Indian banks have historically had a lower risk appetite, tending to be more cautious about financing projects on the continent – particularly those perceived to carry sovereign or regulatory risk. African banks with a strong regional presence and a deep understanding of local markets can reap the benefits, leveraging partnerships via trade hubs to support transactions across diverse markets.

Banks should also collaborate to boost financial inclusion across both regions and unlock trade growth. India’s own experience provides valuable lessons for the continent to tap into. Cashless payments have boomed in India over the past two decades.

In 2009, India launched its Aadhaar card – an individual identification number issued by the government, used to streamline the process of verifying citizens when opening a bank account or applying for financial products.

This has given a digital identity to over a billion Indian citizens, many of whom were previously “off-grid” and may have struggled to access financial services.

India has also pioneered the Unified Payments Interface (UPI) as part of its digital payment revolution: a simple, unified platform that enables users to transfer money instantly between accounts. Africa, by contrast, still faces a significant inclusion gap, with large populations reliant on cash and having limited access to banking. While mobile money has been a runaway success in some pockets of Africa – especially in East Africa, once the epicentre of mobile money – adoption remains fragmented elsewhere.

There is a huge opportunity to build on this foundation, extending digital identity, payments interoperability, and cross-border transaction platforms across the continent. Banks, governments, regulators, and telecommunications companies can work together to accelerate innovation and transform financial connectivity between the two regions.

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Banks can act as connectors for India and Africa’s deepening trade ties, bridging cultural, regulatory, and financial gaps that, left unaddressed, constrain opportunity. 

The turbulence of a post-tariff world offers both challenges and opportunities; if banks on both sides collaborate to build a trade corridor that is resilient and inclusive, they stand to boost economic growth in the Global South and benefit from shared prosperity.