Is 'Fiction' the Problem?

This question constantly pops into my head when I ponder upon the problems some people have with the term 'Islamic Fiction'. For some, it's an oxymoron - two distinctively separate words mismatched into one phrase. However, which part of the phrase 'Islamic Fiction' is inherently out of place? Islamic or Fiction?

According to the Oxford dictionary, the word 'fiction' is defined as:

noun
1 prose literature, especially novels, describing imaginary events and people.
2 invention as opposed to fact.
3 a false belief or statement, accepted as true for the sake of convenience.

If one looks carefully at the above definitions, it's quite obvious that when fiction is used in a literary sense, the first definition most certainly applies, and thus Islamic fiction would be defined as: Islamic prose literature, describing imaginary events and people, right?

Why then do some people insist that literary fiction - whether Islamically orientated or not - is more suited to fit into the third definition: a false belief or statement. Of course, it is known that fiction is not fact - no writer presents it as such - yet many place writers of fiction into the same boat as those who tell lies!

And funnily enough, a lie is: 1 an intentionally false statement. 2 a situation involving deception or founded on a mistaken impression - none of which a fiction writer does!

It's mind-boggling, to say the least. One can go round in circles for years, trying to work out why exactly people are afraid of fiction. Is it because the stories are not true? If so, that doesn't equate them to be useless, does it? From the many Islamic fiction books that I have read, they are extremely beneficial, alhamdulillaah. But yet... they are a pack of lies!