What do you mean by divide? Does one imagine that two people would look at a pile of 10 apples, one asks to buy half of them, and have both merchant and customer be baffled at how to proceed? If you mean how to write numbers and perform long division you might be onto something.

The double-entry bookkeeping systems for accounting were developed by 1300 and quickly became widely used. Literacy rates began quickly improving into the 20-30% rate by the 1400's. 1200 AD is an interesting time to pick because a resurgence in mathematical knowledge was beginning, and new books on math were being published in Europe. Translations were performed on old Latin texts and advancements in knowledge were being made by people like Fibonacci.

Division was taught in the Quadrivium which was considered an advanced topic in the Monastic and Cathedral schools of the time (same with the Universities).

Around 1200 CE, Al Khwarizmi's book on arithmetic and algebra was just being translated and disseminated though-out Europe. So certainly very well educated people (but easily within the 1% you are talking about) would know of his arithmetic algorithms which included long division.

Alcuin's book for teaching students includes problems that require division. However, you can see in the answers that they are all divisions by very small numbers (I can see only 2, 3, 4, or 12). So one might imagine that the method used was simply: if n * 12 = 36, simply count 12, 24, 36 upward until you get your result to solve for n as 3. So around 800 CE, some people (probably > 1%) knew some kind of primitive division. But I am not sure if this counts.

Certainly that figure seems quite plausible. But maybe a 100 years later or so that number would have dramatically increased (at the very least, it would been helpful for merchants).

Define "Western World". If you lump Byzantium in with "the West", your statement would be false. I feel that even applying such a statement to Latin Europe from the Late 10th Century onward might even be pushing it.