Dissertation (MA Development Studies)The decision to investigate on the potentials of SMEs for youth employment in Mwanza, emanated from the increasingly unemployment problem to youth in the country. The existence of SMEs sought to reduce unemployment problem. However in Mwanza city and to most big towns there is massive unemployed youth with the presence of SMEs. Therefore, the study aims to examine potentials of SMEs in youth employment, highlights challenges hindering the sector from providing youth with employment and determine ways to improve the effectiveness of the sector in providing employment to youth in Mwanza city and Tanzania in general. Both primary and secondary data were employed while analysis was done quantitatively and qualitatively. Purposive and simple random sampling methods were adopted in searching primary data. In the secondary data speculations, some documents were reviewed from books to the websites. The uncovered potentials of SMEs were job creation, innovations encouragement, technological base, business expansion platforms and a catalyst for development. Numerous setbacks counter attacking the industry are power shortages, over taxation and tributes, lack of support, shortages of raw- materials, disunity, insecurity, disorganization amongst the industry workers, low price, wages and salaries to the employees, lack of inclusive and vivid conservational measures governing the industry. If all these handled with care, the SME sector will turn to be a place to trust for employment especially to unemployed youth. The study suggested improvements in financial, education, technologically and in social skills.