The Kenyan coastal strip was integrated into the world economy by ancient world trade routes that spanned Africa, Asia and Europe between 70 AD and 1500 AD.
Foreign merchants brought their merchandise to Kenyan coast and left with African goods.
In 1499 AD, Vasco da Gama returned from discovering the sea route to India through South Africa.
This new route allowed European nations to dominate the trade economy of the East African coast, with the Portuguese entrenching themselves in the 16th and 17th centuries.
In the 18th century the Portuguese were replaced in this East African economic corridor by Omani Arabs.
Eventually, the British replaced the Omani Arabs.
In 1895 they dominated the coastal strip, and by 1920 they had followed the interior trade routes all the way to the Buganda Kingdom.
To make this ancient economic trade route more profitable, the British used Indian laborers to build a railway from Mombasa at the coast to Kampala, the capital of Buganda kingdom, following the old trade route.
Major towns were founded along the railway line, backed by European settler farming communities.
The Indian laborers who did not return to India after railway construction ended were the first to establish shops (dukawallahs) in these towns.
During the colonial period, the European settler farming community and the Indian dukawallahs established the foundations of the modern formal Kenyan economy.
Prominent examples of Asian-Kenyan business owners whose businesses started as dukawallahs include Manu Chandaria and Madatally Manji.
While Europeans and Indians enjoyed strong economic growth between 1920 and 1963, Africans were deprived of their land, dehumanized and forced to work for minimal pay under extremely poor working conditions through a well-established system of racial segregation.

Kenya regained its independence in 1963.
Under President Jomo Kenyatta, the Kenyan government promoted africanization of the Kenyan economy, generating rapid economic growth through public investment, encouragement of smallholder agricultural production, and incentives for private, often foreign, industrial investment.
An influential sessional paper authored by Tom Mboya and Mwai Kibaki in 1965 stressed the need for Kenya to avoid both the capitalistic economy of the West and the communism of the East.
The paper argued that Kenya should instead concentrate on African socialism, while avoiding linking Kenya's economic fortunes to any country or group of countries.
From 1963 to 1973 gross domestic product (GDP) grew at an annual average rate of 6.6%, and during the 1970s it grew at an average rate of 7.2%.
Agricultural production grew by 4.7% annually during the same period, stimulated by redistributing estates, distributing new crop strains, and opening new areas to cultivation.
However the rate of GDP growth declined to 4.2% per year in the 1980s, and 2.2% a year in the 1990s.

Kenya's policy of import substitution, which started in 1946 with European and Asian enterprises, did not achieve the desired result of transforming Kenya's industrial base, and in the late 1970s rising oil prices began to make Kenya's manufacturing sector noncompetitive.
In response, the government began a massive intervention in the private sector.
Lack of export incentives, tight import controls, and foreign exchange controls made the domestic environment for investment even less attractive.
From 1991 to 1993, Kenya had its worst economic performance since independence.
Growth in GDP stagnated, and agricultural production shrank at an annual rate of 3.9%.
Inflation reached a record of 100% in August 1993, and the government's budget deficit was over 10% of GDP.
As a result of these issues, bilateral and multilateral donors suspended their aid programs in Kenya in 1991.

In the 1980s and 1990s, at the height of the Daniel arap Moi administration, the introduction of structural adjustment programs (SAPs) sponsored by the IMF and World Bank contributed to the decline and two-decade stagnation of Kenya's economy.
Some of the conditions of the SAPs, such as structural adj
The Kenyan coastal strip was integrated into the world economy by ancient world trade routes that spanned Africa, Asia and Europe between 70 AD and 1500 AD. Foreign merchants brought their merchandise to Kenyan coast and left with African goods. In 1499 AD, Vasco da Gama returned from discovering the sea route to India through South Africa. This new route allowed European nations to dominate the trade economy of the East African coast, with the Portuguese entrenching themselves in the 16th and 17th centuries. In the 18th century the Portuguese were replaced in this East African economic corridor by Omani Arabs. Eventually, the British replaced the Omani Arabs. In 1895 they dominated the coastal strip, and by 1920 they had followed the interior trade routes all the way to the Buganda Kingdom. To make this ancient economic trade route more profitable, the British used Indian laborers to build a railway from Mombasa at the coast to Kampala, the capital of Buganda kingdom, following the old trade route. Major towns were founded along the railway line, backed by European settler farming communities. The Indian laborers who did not return to India after railway construction ended were the first to establish shops (dukawallahs) in these towns. During the colonial period, the European settler farming community and the Indian dukawallahs established the foundations of the modern formal Kenyan economy. Prominent examples of Asian-Kenyan business owners whose businesses started as dukawallahs include Manu Chandaria and Madatally Manji. While Europeans and Indians enjoyed strong economic growth between 1920 and 1963, Africans were deprived of their land, dehumanized and forced to work for minimal pay under extremely poor working conditions through a well-established system of racial segregation.
Kenya regained its independence in 1963. Under President Jomo Kenyatta, the Kenyan government promoted africanization of the Kenyan economy, generating rapid economic growth through public investment, encouragement of smallholder agricultural production, and incentives for private, often foreign, industrial investment. An influential sessional paper authored by Tom Mboya and Mwai Kibaki in 1965 stressed the need for Kenya to avoid both the capitalistic economy of the West and the communism of the East. The paper argued that Kenya should instead concentrate on African socialism, while avoiding linking Kenya's economic fortunes to any country or group of countries. From 1963 to 1973 gross domestic product (GDP) grew at an annual average rate of 6.6%, and during the 1970s it grew at an average rate of 7.2%. Agricultural production grew by 4.7% annually during the same period, stimulated by redistributing estates, distributing new crop strains, and opening new areas to cultivation. However the rate of GDP growth declined to 4.2% per year in the 1980s, and 2.2% a year in the 1990s.
Kenya's policy of import substitution, which started in 1946 with European and Asian enterprises, did not achieve the desired result of transforming Kenya's industrial base, and in the late 1970s rising oil prices began to make Kenya's manufacturing sector noncompetitive. In response, the government began a massive intervention in the private sector. Lack of export incentives, tight import controls, and foreign exchange controls made the domestic environment for investment even less attractive. From 1991 to 1993, Kenya had its worst economic performance since independence. Growth in GDP stagnated, and agricultural production shrank at an annual rate of 3.9%. Inflation reached a record of 100% in August 1993, and the government's budget deficit was over 10% of GDP. As a result of these issues, bilateral and multilateral donors suspended their aid programs in Kenya in 1991.
In the 1980s and 1990s, at the height of the Daniel arap Moi administration, the introduction of structural adjustment programs (SAPs) sponsored by the IMF and World Bank contributed to the decline and two-decade stagnation of Kenya's economy. Some of the conditions of the SAPs, such as structural adj
Economy of Kenya