Dissertation (MA Development Studies)This study on the contribution of small and medium enterprises to the development of Zanzibar economy, Drop of Zanzibar and Zainab bottlers were taken as the case study. It was important to conduct this research in Zanzibar urban district region because no research of such nature. The study comprised one hundred respondents from study. Simple random sampling is technique which used to select one hundred respondents from total population of 7,825 people from the study area. Data were collected through questionnaire and analyzed using statistical package for Social Science (SPSS) version. The study revealed, the small and medium enterprises contribute greatly to employment creation, increase government revenue, increase friendship between one country to another. Apart from that, small and medium enterprises (SMEs) facing many obstacles such as lack of government and political willingness, population growth, poor technology, inadequate number of workers and insufficient working equipments. The study recommended that in order to ensure that there is great contribution of small and medium enterprises to the economy there is need to improve the working environment of workers through increasing salary to the workers and to provide more opportunities of employment to the local peoples. Also the government should review existing laws and control the donors from setting heavy condition and also to ensure availability of market to their products.