A Dissertation submitted in partial fulfillment of the Requirements for the Degree of Master of Business Administration in Corporate Management (MBA-CM) of Mzumbe University.Small and medium enterprises (SMEs) have a large significant contribution of development to individuals as well as a nation; therefore better performance of SMEs is of critical value. This study aimed at exploring the causes of ill performance in small and medium enterprises in Tanzania, the case study of Kinondoni Municipal. The study was guided by three research objectives which were assessing the internal and external causes of ill performance of SMEs and the level of performance among SMEs in the study area. The study employed descriptive research design. The researcher employed convenient sampling technique in recruiting 132 SMEs from the study area as the sample size. Data was obtained through questionnaires as well as interviews. Data analysis was employed both qualitatively and quantitatively. It is concluded that most of SMEs in Tanzania are not performing well due a number of factors. It is concluded that internal factors such as high risk business factors, lack of effective leadership skills of the business, nature of social life of the SMEs owner, lack of effective training, lack of competent staff as well as lack of capital. For external factors, it has been found that ill performance of the SMEs is caused by poor government policies such as high taxation and ineffective regulatory bodies such as SIDO. Also, ill performance of SMEs in the study area is caused by economic factors such as higher interest rate charged by financial institutions, low money supply in the economy due to economic reformation strategies as well as high competition among SMEs. Although financial institution has grown and improve currently these Micro finance institutions and SACCOS they lend money to entrepreneurs without collateral it’s simply through group formation the challenge which government should involve to reduce the interest rate which were required to pay to be favourable for entrepreneurs. The Small and Medium enterprises required to find more skills apart from what they have, business skills and leadership skills were the one of the skills which were required in order to improve their business performance.